Home Depot, Inc.
Loading chart...
Item 1. Business.
INTRODUCTION
The Home Depot, Inc. is the world’s largest home improvement retailer based on net sales for fiscal 2025. We offer our customers a wide assortment of home improvement products, building materials, lawn and garden products, décor products, and facilities MRO products, in stores and online. We also provide a number of services, including home improvement installation services, and tool and equipment rental. As of the end of fiscal 2025, we operated 2,359 stores located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. We also maintain a network of distribution and fulfillment centers, as well as mobile applications and e-commerce websites in the U.S., Canada, and Mexico. For disclosure purposes, the geographic operating segments of the U.S., Canada and Mexico are aggregated into one reportable segment (the “Primary segment”).
In fiscal 2024, we acquired SRS, a leading residential specialty trade distribution company across several verticals engaged in the distribution of residential and commercial roofing products and complementary building products, landscape supplies, and swimming pool supplies serving the professional roofer, landscaper, and pool contractor. In fiscal 2025, SRS completed the acquisition of GMS, a leading distributor of specialty building products, including drywall, ceilings, steel framing and other complementary construction products. At the end of fiscal 2025, SRS, which includes GMS, operated over 1,250 locations throughout the U.S. and Canada, most of which have a distribution center, material handling and delivery equipment, and inventory. Following the GMS acquisition, SRS is organized as four different lines of business: roofing and building products, interior and construction products, landscape, and pool. Each line of business was determined to represent an operating segment, none of which are deemed reportable segments.
Unless otherwise indicated or the context otherwise requires, when we refer to “The Home Depot,” “Home Depot,” the “Company,” “we,” “us” or “our” in this report, we are referring to The Home Depot, Inc. and its consolidated subsidiaries.
The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978. Our Store Support Center (corporate headquarters) is located at 2455 Paces Ferry Road, Atlanta, Georgia 30339. Our telephone number at that address is (770) 433-8211.
OUR BUSINESS
OUR STRATEGY
The Home Depot is focused on leveraging its distinct competitive advantages – our brand, excellent customer service, product authority in home improvement, knowledgeable associates and culture, scale, premier real estate portfolio, digital and interconnected experience, supply chain network, and our deep relationships with Pros – to take advantage of the significant growth opportunities in the highly fragmented markets in which we operate. In fiscal 2025, we strategically invested across our business to advance our growth strategy:
•Drive our core and culture by supporting our associates so that they can deliver the best customer experience in home improvement;
•Deliver a frictionless interconnected customer experience, regardless of whether our customers choose to engage and shop with us in-store or through our digital properties; and
•Win with Pros through our differentiated value proposition and ecosystem of capabilities.
We believe that this strategy will help us grow faster than the market and deliver value to our shareholders. Driven by our core values, our Inverted Pyramid model reminds us who matters most – our customers and our associates. These values, embedded in our culture since the Company’s founding, continue to guide us as our business evolves.
Fiscal 2025 Form 10-K | 1 | ||||||
DELIVER SHAREHOLDER VALUE
We seek to deliver on our objective to create shareholder value through our disciplined approach to capital allocation. Our capital allocation principles are as follows:
•First, we intend to reinvest in our business to drive growth faster than the market.
•Second, after reinvesting in the business, we look to pay a quarterly dividend.
•Third, after reinvesting in our business and paying our dividend, we intend to return excess cash to our shareholders through share repurchases.
In fiscal 2025, we invested $3.7 billion in capital expenditures across initiatives supporting our strategy of driving our core and culture, including building new stores and maintaining existing stores, delivering a frictionless, interconnected experience, and winning with Pros. SRS also acquired GMS to accelerate the vision of becoming a leading, multi-category building materials distributor. We continue to focus on driving productivity throughout the business, including by leveraging technology to drive efficiency in freight flow management, supply chain optimization, and streamlining central processes. By reinvesting in our business to drive growth and productivity, we are able to improve the customer experience, increase our competitiveness in the market, and deliver shareholder value.
In fiscal 2025, we returned $9.2 billion to shareholders in the form of cash dividends, following a 2.2% increase in our quarterly cash dividend from $2.25 per share to $2.30 per share announced in February 2025. Our capital allocation is discussed further in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OUR CUSTOMERS
We serve two primary customer groups — consumers (including both DIY and DIFM customers) and Pros — and have developed varying approaches to meet their diverse needs:
DIY Customers
These customers are typically homeowners who purchase products and complete their own projects and installations. Our associates assist these customers both in our stores and through digital resources designed to provide product and project knowledge. We also offer a variety of clinics and workshops to share this knowledge and to build an emotional connection with our DIY customers. As the preferences and behaviors of our DIY customers change, we are continuing to invest in capabilities to better meet their evolving expectations.
Pros
These customers are primarily professional renovators/remodelers, general contractors, homebuilders, maintenance professionals, handymen, property managers, building service contractors and specialty tradespeople, such as electricians, landscapers, insulation installers, plumbers, painters, pool contractors, roofers, and wallboard and ceiling installers. These customers build, renovate, remodel, repair, and maintain residential properties, multifamily properties, hospitality properties, and commercial facilities, including educational, healthcare, governmental, institutional, and office buildings, as well as data centers.
We have a number of initiatives designed to drive growth with Pros, including those working on both simple and complex projects. We remain focused on providing a customized digital experience tailored to Pros’ needs, a dedicated sales force, a broad and deep assortment of Pro-focused products and brands, an extensive delivery network, our Pro Xtra loyalty program, and enhanced credit offerings. Building on our historical strength as a destination for all Pros, we are continuing to invest in differentiated capabilities that will help us better serve our Pros’ needs, including differentiated fulfillment options, preferred pricing, additional trade credit offerings including our Pro Trade Credit program, more convenient locations and showroom space, and technology tools designed to streamline order management and project planning and management. In fiscal 2024, we acquired SRS, which sells products to specialty trade roofers, landscapers, and pool contractors. The acquisition of GMS by SRS in fiscal 2025 further expanded our ability to serve Pros by adding specialty interior building products such as wallboard, ceilings, steel framing and complementary products for residential and commercial projects. We also provide MRO products and related value-added services to multifamily, hospitality, healthcare, and government housing facilities, among others, primarily through our subsidiary HD Supply.
We believe these investments in differentiated capabilities support our goal to serve as the preferred partner for our Pros across their entire project, giving them the choice to streamline their purchasing to optimize efficiency and complete their jobs on time and on budget.
Fiscal 2025 Form 10-K | 2 | ||||||
DIFM Customers
Intersecting our DIY customers and our Pros are our DIFM customers. These customers are typically homeowners who use Pros to complete their projects or installations. Currently, we offer installation services in a variety of categories, such as flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, windows, and window coverings. DIFM customers can purchase these services in our stores, online, or in their homes through in-home consultations. In addition to serving our DIFM customer needs, we believe our focus on Pros who perform services for these customers helps us drive higher product sales.
OUR PRODUCTS AND SERVICES
A typical Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both national brand name and proprietary products, across the following merchandising departments: Appliances, Bath, Building Materials, Electrical, Flooring, Hardware, Indoor Garden, Kitchen & Blinds, Lighting, Lumber, Millwork, Outdoor Garden, Paint, Plumbing, Power, and Storage & Organization. Our online product offerings complement our stores by serving as an extended aisle, and we offer a significantly broader product assortment through our mobile applications and websites, including homedepot.com, our primary website; homedepot.ca and homedepot.com.mx, our websites in Canada and Mexico, respectively; hdsupply.com, our website for our MRO products and related services; our websites for custom window coverings, including blinds.com, justblinds.com and americanblinds.com; constructionresourcesusa.com, our website for design-oriented surfaces, appliances and architectural specialty products for Pros; thecompanystore.com, our website featuring textiles and décor products; and srsdistribution.com, heritagelandscapesupplygroup.com, heritagepoolsupplygroup.com, and gms.com, our websites serving the roofing and exterior building materials, landscape, pool product, and interior building product needs of specialty trade Pros, respectively.
Our merchandising organization delivers product innovation, assortment and value, which reinforces our position as the product authority in home improvement and is one of our distinctive competitive advantages. At the same time, we remain focused on offering the right products at everyday value in our stores and online. The strong strategic relationships that our merchandising organization builds with our vendors position us to deliver on our goals for our customers and offer a compelling business proposition for these market-leading suppliers. As part of our focus on product differentiation, we have formed strategic alliances and exclusive relationships with certain suppliers to market products under a variety of well-recognized brand names. We have also developed relationships with certain suppliers to allow us to offer proprietary products that are comparable to national brands. These proprietary products help differentiate us from other retailers and generally carry higher margins than national brand products.
To keep pace with changing customer expectations and increasing desire for innovation, localization, and personalization, we continue to invest in tools to better leverage our data and drive a deeper level of collaboration with our suppliers. As a result, we continue to focus on enhanced merchandising information technology tools to help us: (1) enhance an interconnected shopping experience tailored to our customers’ shopping intent and location; (2) provide the best value in the market; and (3) optimize our product assortments. Our merchandising team leverages technology and works closely with our inventory and supply chain teams, as well as our suppliers, to manage our assortments, drive innovation, manage the cost environment, and adjust inventory levels to respond to shifts in demand.
To complement our merchandising efforts, we offer a number of services for our customers, including installation services for our DIY and DIFM customers, as noted above. We also provide tool and equipment rentals at many locations, providing value and convenience for both Pros and consumers. To improve the customer experience and continue to grow this differentiated service offering, we continue to invest in more tool rental locations, more tools, and better technology.
Sourcing and Quality Assurance
We maintain a global sourcing program to obtain high-quality and innovative products directly from manufacturers in the U.S. and around the world. For many years, we have worked to diversify our global supply chain. During fiscal 2025, in addition to our U.S. sourcing operations, we maintained sourcing offices in Mexico, Canada, India, Vietnam, Taiwan and China, as well as certain locations in Europe. Under our standard supplier buying agreement, our suppliers are obligated to ensure that their products comply with applicable international, federal, state and local laws. This standard agreement also requires compliance with our responsible sourcing standards, which cover a variety of expectations, including supply chain transparency, compliance with applicable laws and regulations addressing prohibitions on child and forced labor, health and safety, environmental matters, compensation, and hours of work. To drive accountability with our suppliers, our standard supplier buying agreement also includes a factory audit right related to these standards, and we conduct risk-based factory audits and compliance visits with
Fiscal 2025 Form 10-K | 3 | ||||||
non-Canada and non-U.S. suppliers of private branded and direct import products. Our 2025 Responsible Sourcing Report, available on our Investor Relations website at https://ir.homedepot.com under “Sustainability,” provides more information about this program. In addition, we have both quality assurance and engineering resources dedicated to establishing criteria and overseeing compliance with safety, quality, and performance standards for our private branded products.
Intellectual Property
Our business has one of the most recognized brands in North America. As a result, we believe that The Home Depot® trademark has significant value and is an important factor in the marketing of our products, e-commerce, stores and business. We have registered or applied for registration of trademarks, service marks, copyrights and internet domain names, both domestically and internationally, for use in our business, including our proprietary brands such as HDX
Loading financial statements...
Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
| Line item |
|---|
| Period ending |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion provides an analysis of the Company’s financial condition and results of operations from management’s perspective and should be read in conjunction with the consolidated financial statements and related notes included in this report and in the 2025 Form 10-K and with our MD&A included in the 2025 Form 10-K.
TABLE OF CONTENTS
EXECUTIVE SUMMARY
For the second quarter of fiscal 2026, net sales were $47.9 billion and net earnings were $4.8 billion, or $4.79 per diluted share. For the first six months of fiscal 2026, net sales were $89.6 billion and net earnings were $8.1 billion, or $8.09 per diluted share.
During the first six months of fiscal 2026, we generated $11.4 billion of cash flow from operations. This cash flow, together with cash on hand, was used to fund $4.6 billion in cash dividends, repay $3.0 billion of long-term debt, fund $1.7 billion in capital expenditures, and fund $1.3 billion in acquisitions.
In February 2026, we announced a 1.3% increase in our quarterly cash dividend to $2.33 per share.
Our inventory turnover ratio was 4.5 times at the end of the second quarter of fiscal 2026, compared to 4.6 times at the end of the second quarter of fiscal 2025.
Our ROIC for the trailing twelve-month period was 24.8% at the end of the second quarter of fiscal 2026 and 27.2% at the end of the second quarter of fiscal 2025. The decrease in ROIC was primarily driven by higher average equity due to our ongoing pause in share repurchases. See the Non-GAAP Financial Measures section below for our definition and calculation of ROIC.
During the second quarter of fiscal 2026, we opened three new stores in the U.S., resulting in a total store count of 2,364 at August 2, 2026. A total of 325 stores, or 13.7%, were located in Canada and Mexico. At the end of the second quarter of fiscal 2026, we also operated over 1,340 locations within our SRS non-reportable operating segments throughout the U.S. and Canada.
Tariffs and Other Trade Policy Matters
We continue to monitor developments related to tariffs and other trade policy matters, including the effects of the U.S. Supreme Court decision invalidating tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”), ongoing litigation, and the implementation of additional tariffs. During the second quarter of fiscal 2026, we began receiving IEEPA tariff refunds pursuant to the U.S. Supreme Court ruling, and as of August 2, 2026, we had received approximately $730 million in IEEPA tariff refunds, representing the vast majority of our expected refunds. Approximately $685 million of these refunds were recognized as a reduction of cost of goods sold, with the remaining amount recorded as a reduction of inventory cost, nearly all within our Primary segment. Interest received in connection with the IEEPA tariff refunds was recognized within interest income and other, net on the consolidated statement of earnings.
As tariff and trade policy discussions are ongoing and related matters continue to evolve, we cannot predict with certainty their ultimate impact on our business in future periods, including our results of operations and cash flows. For more information on these risks and uncertainties see Part I, Item 1A. “Risk Factors” of our 2025 Form 10-K.
Fiscal Q2 2026 Form 10-Q | 15 | ||||||
RESULTS OF OPERATIONS
The following table presents the percentage relationship between net sales and major categories in our consolidated statements of earnings.
FISCAL 2026 AND FISCAL 2025 THREE MONTH COMPARISONS
| Three Months Ended | |||||||||||||||||||||||
| August 2, 2026 | August 3, 2025 | ||||||||||||||||||||||
| dollars in millions | $ | % of Net Sales | $ | % of Net Sales | |||||||||||||||||||
| Net sales | $ | 47,861 | $ | 45,277 | |||||||||||||||||||
| Gross profit | 16,115 | 33.7 | % | 15,125 | 33.4 | % | |||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 8,424 | 17.6 | 7,764 | 17.1 | |||||||||||||||||||
| Depreciation and amortization | 852 | 1.8 | 806 | 1.8 | |||||||||||||||||||
| Total operating expenses | 9,276 | 19.4 | 8,570 | 18.9 | |||||||||||||||||||
| Operating income | 6,839 | 14.3 | 6,555 | 14.5 | |||||||||||||||||||
| Interest and other (income) expense: | |||||||||||||||||||||||
| Interest income and other, net | (59) | (0.1) | (25) | (0.1) | |||||||||||||||||||
| Interest expense | 583 | 1.2 | 575 | 1.3 | |||||||||||||||||||
| Interest and other, net | 524 | 1.1 | 550 | 1.2 | |||||||||||||||||||
| Earnings before provision for income taxes | 6,315 | 13.2 | 6,005 | 13.3 | |||||||||||||||||||
| Provision for income taxes | 1,549 | 3.2 | 1,454 | 3.2 | |||||||||||||||||||
| Net earnings | $ | 4,766 | 10.0 | % | $ | 4,551 | 10.1 | % | |||||||||||||||
—————
Note: Certain percentages may not sum to totals due to rounding.
| Three Months Ended | ||||||||||||||||
| Selected financial and sales data: | August 2, 2026 | August 3, 2025 | % Change | |||||||||||||
Comparable sales (% change) | 1.7 | % | 1.0 | % | N/A | |||||||||||
Comparable customer transactions (% change) (1) | (1.0) | % | (0.4) | % | N/A | |||||||||||
Comparable average ticket (% change) (1) (2) | 2.8 | % | 1.4 | % | N/A | |||||||||||
Customer transactions (in millions) (1) | 443.2 | 446.8 | (0.8) | % | ||||||||||||
Average ticket (1) (2) | $ | 92.50 | $ | 90.01 | 2.8 | % | ||||||||||
Diluted earnings per share | $ | 4.79 | $ | 4.58 | 4.6 | % | ||||||||||
—————
(1)Customer transactions and average ticket measures do not include results from HD Supply or SRS.
(2)Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.
Sales
We assess our sales performance by evaluating both net sales and comparable sales.
Net Sales. Net sales for the second quarter of fiscal 2026 were $47.9 billion, an increase of 5.7% from $45.3 billion for the second quarter of fiscal 2025. The increase in net sales for the second quarter of fiscal 2026 was primarily driven by sales from GMS, which was acquired on September 4, 2025 and contributed $1.4 billion of incremental net sales during the second quarter of fiscal 2026, as well as the impact of a positive comparable sales environment. Net sales also increased due to sales from our acquisition of Mingledorff’s as well as sales from new stores and branches.
Online sales represented 16.6% of net sales during the second quarter of fiscal 2026 and increased by 11.0% compared to the second quarter of fiscal 2025. Online sales consist of sales of products generated through websites and mobile applications and do not include results from HD Supply or SRS.
Fiscal Q2 2026 Form 10-Q | 16 | ||||||
A weaker U.S. dollar compared to the second quarter of fiscal 2025 positively impacted net sales by $105 million during the second quarter of fiscal 2026.
Comparable Sales. Comparable sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior period of equivalent length. Comparable sales includes sales at locations, physical and online, open greater than 52 weeks (including remodels and relocations) and excludes closed stores. Acquisitions are typically included in comparable sales after they have been owned for more than 52 weeks. Comparable sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP. The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as similarly titled measures reported by other companies.
Total comparable sales for the second quarter of fiscal 2026 increased 1.7%, primarily reflecting a 2.8% increase in comparable average ticket, partially offset by a 1.0% decrease in comparable customer transactions compared to the second quarter of fiscal 2025. Foreign exchange rates positively impacted comparable sales by approximately 25 basis points for the second quarter of fiscal 2026. Our comparable sales results reflect customer engagement with smaller repair and maintenance projects, despite the impact of consumer uncertainty and housing affordability pressure on home improvement demand.
During the second quarter of fiscal 2026, our Storage & Organization, Electrical, Hardware, Power, Plumbing, Indoor Garden, Kitchen & Blinds, Paint, Bath, Outdoor Garden, Building Materials, Flooring, and Millwork merchandising departments within our Primary segment posted positive comparable sales compared to the second quarter of fiscal 2025.
Gross Profit
Gross profit for the second quarter of fiscal 2026 increased 6.5% to $16.1 billion from $15.1 billion for the second quarter of fiscal 2025. Gross profit as a percentage of net sales, or gross profit margin, was 33.7% for the second quarter of fiscal 2026 compared to 33.4% for the second quarter of fiscal 2025. The increase in gross profit margin during the second quarter of fiscal 2026 reflects the benefit from IEEPA tariff refunds, largely offset by incremental cost pressures related to fuel, energy, and other product input costs, as well as the inclusion of GMS in our consolidated results.
Operating Expenses
Our operating expenses are composed of SG&A and depreciation and amortization.
Selling, General & Administrative. SG&A for the second quarter of fiscal 2026 increased $660 million, or 8.5%, to $8.4 billion from $7.8 billion for the second quarter of fiscal 2025. As a percentage of net sales, SG&A was 17.6% for the second quarter of fiscal 2026 compared to 17.1% for the second quarter of fiscal 2025, primarily reflecting higher operating costs relative to comparable sales performance.
Depreciation and Amortization. Depreciation and amortization for the second quarter of fiscal 2026 increased $46 million, or 5.7%, to $852 million from $806 million for the second quarter of fiscal 2025. As a percentage of net sales, depreciation and amortization was 1.8% for both the second quarter of fiscal 2026 and 2025.
Interest and Other, net
Interest and other, net was $524 million for the second quarter of fiscal 2026 compared to $550 million for the second quarter of fiscal 2025. As a percentage of net sales, interest and other, net was 1.1% for the second quarter of fiscal 2026 compared to 1.2% for the second quarter of fiscal 2025, and reflects higher interest income due to interest received from IEEPA tariff refunds during the second quarter of fiscal 2026.
Provision for Income Taxes
Our combined effective income tax rate was 24.5% for the second quarter of fiscal 2026 compared to 24.2% for the second quarter of fiscal 2025.
Diluted Earnings per Share
Diluted earnings per share were $4.79 for the second quarter of fiscal 2026 compared to $4.58 for the second quarter of fiscal 2025. The increase in diluted earnings per share was primarily driven by higher net earnings during the second quarter of fiscal 2026.
Fiscal Q2 2026 Form 10-Q | 17 | ||||||
FISCAL 2026 AND FISCAL 2025 SIX MONTH COMPARISONS
| Six Months Ended | |||||||||||||||||||||||
| August 2, 2026 | August 3, 2025 | ||||||||||||||||||||||
| dollars in millions | $ | % of Net Sales | $ | % of Net Sales | |||||||||||||||||||
| Net sales | $ | 89,626 | $ | 85,133 | |||||||||||||||||||
| Gross profit | 29,896 | 33.4 | % | 28,584 | 33.6 | % | |||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 16,383 | 18.3 | 15,294 | 18.0 | |||||||||||||||||||
| Depreciation and amortization | 1,693 | 1.9 | 1,602 | 1.9 | |||||||||||||||||||
| Total operating expenses | 18,076 | 20.2 | 16,896 | 19.8 | |||||||||||||||||||
| Operating income | 11,820 | 13.2 | 11,688 | 13.7 | |||||||||||||||||||
| Interest and other (income) expense: | |||||||||||||||||||||||
| Interest income and other, net | (66) | (0.1) | (49) | (0.1) | |||||||||||||||||||
| Interest expense | 1,194 | 1.3 | 1,190 | 1.4 | |||||||||||||||||||
| Interest and other, net | 1,128 | 1.3 | 1,141 | 1.3 | |||||||||||||||||||
| Earnings before provision for income taxes | 10,692 | 11.9 | 10,547 | 12.4 | |||||||||||||||||||
| Provision for income taxes | 2,637 | 2.9 | 2,563 | 3.0 | |||||||||||||||||||
| Net earnings | $ | 8,055 | 9.0 | % | $ | 7,984 | 9.4 | % | |||||||||||||||
—————
Note: Certain percentages may not sum to totals due to rounding.
| Six Months Ended | ||||||||||||||||
| Selected financial and sales data: | August 2, 2026 | August 3, 2025 | % Change | |||||||||||||
Comparable sales (% change) | 1.2 | % | 0.4 | % | N/A | |||||||||||
Comparable customer transactions (% change) (1) | (1.2) | % | (0.5) | % | N/A | |||||||||||
Comparable average ticket (% change) (1) (2) | 2.5 | % | 0.7 | % | N/A | |||||||||||
Customer transactions (in millions) (1) | 834.3 | 841.6 | (0.9) | % | ||||||||||||
Average ticket (1) (2) | $ | 92.62 | $ | 90.34 | 2.5 | |||||||||||
Diluted earnings per share | $ | 8.09 | $ | 8.03 | 0.7 | % | ||||||||||
—————
(1)Customer transactions and average ticket measures do not include results from HD Supply or SRS.
(2)Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.
Sales
We assess our sales performance by evaluating both net sales and comparable sales.
Net Sales. Net sales for the first six months of fiscal 2026 were $89.6 billion, an increase of 5.3% from $85.1 billion for the first six months of fiscal 2025. The increase in net sales for the first six months of fiscal 2026 was primarily driven by sales from GMS which contributed approximately $2.8 billion of incremental net sales during the first six months of fiscal 2026, as well as the impact of a positive comparable sales environment. Net sales also increased due to sales from new stores and branches, as well as our acquisition of Mingledorff’s.
Online sales represented 16.5% of net sales during the first six months of fiscal 2026 and increased by 10.8% compared to the first six months of fiscal 2025.
A weaker U.S. dollar compared to the first six months of fiscal 2025 positively impacted net sales by $325 million during the first six months of fiscal 2026.
Comparable Sales. Total comparable sales for the first six months of fiscal 2026 increased 1.2%, primarily reflecting a 2.5% increase in comparable average ticket, partially offset by a 1.2% decrease in comparable customer transactions compared to the first six months of fiscal 2025. Foreign exchange rates positively impacted comparable sales by approximately 40 basis points for the first six months of fiscal 2026. Our comparable sales
Fiscal Q2 2026 Form 10-Q | 18 | ||||||
results reflect customer engagement with smaller repair and maintenance projects, despite the impact of consumer uncertainty and housing affordability pressure on home improvement demand.
During the first six months of fiscal 2026, our Storage & Organization, Hardware, Power, Electrical, Plumbing, Indoor Garden, Bath, Paint, Kitchen & Blinds, and Outdoor Garden merchandising departments within our Primary segment posted positive comparable sales compared to the first six months of fiscal 2025.
Gross Profit
Gross profit for the first six months of fiscal 2026 increased 4.6% to $29.9 billion from $28.6 billion for the first six months of fiscal 2025. Gross profit as a percentage of net sales, or gross profit margin, was 33.4% for the first six months of fiscal 2026 compared to 33.6% for the first six months of fiscal 2025. The decrease in gross profit margin during the first six months of fiscal 2026 reflects the inclusion of GMS in our consolidated results, as well as incremental cost pressures related to fuel, energy, and other product input costs, largely offset by the benefit from IEEPA tariff refunds.
Operating Expenses
Our operating expenses are composed of SG&A and depreciation and amortization.
Selling, General & Administrative. SG&A for the first six months of fiscal 2026 increased $1.1 billion, or 7.1%, to $16.4 billion from $15.3 billion for the first six months of fiscal 2025. As a percentage of net sales, SG&A was 18.3% for the first six months of fiscal 2026 compared to 18.0% for the first six months of fiscal 2025, primarily reflecting higher operating costs relative to comparable sales performance.
Depreciation and Amortization. Depreciation and amortization for the first six months of fiscal 2026 increased $91 million, or 5.7%, to $1.7 billion from $1.6 billion for the first six months of fiscal 2025. As a percentage of net sales, depreciation and amortization was 1.9% for the first six months of both fiscal 2026 and fiscal 2025.
Interest and Other, net
Interest and other, net was $1.1 billion for the first six months of both fiscal 2026 and fiscal 2025. As a percentage of net sales, interest and other, net was 1.3% for the first six months of both fiscal 2026 and fiscal 2025.
Provision for Income Taxes
Our combined effective income tax rate was 24.7% for the first six months of fiscal 2026 compared to 24.3% for the first six months of fiscal 2025.
Diluted Earnings per Share
Diluted earnings per share were $8.09 for the first six months of fiscal 2026, compared to $8.03 for the first six months of fiscal 2025. The increase in diluted earnings per share was primarily driven by higher net earnings during the first six months of fiscal 2026.
NON-GAAP FINANCIAL MEASURES
To provide clarity on our operating performance, we supplement our reporting with certain non-GAAP financial measures. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Non-GAAP financial measures presented herein may differ from similar measures used by other companies.
Return on Invested Capital
We believe ROIC is meaningful for management, investors, and ratings agencies because it measures how effectively we deploy our capital base. ROIC is a non-GAAP profitability measure, not a measure of financial performance under GAAP. We define ROIC as NOPAT, a non-GAAP financial measure, for the most recent twelve-month period, divided by average debt and equity. We define average debt and equity as the average of beginning and ending long-term debt (including current installments) and equity for the most recent twelve-month period.
Fiscal Q2 2026 Form 10-Q | 19 | ||||||
The following table presents the calculation of ROIC, together with a reconciliation of NOPAT to net earnings (the most comparable GAAP financial measure):
Twelve Months Ended (2) | |||||||||||
| dollars in millions | August 2, 2026 | August 3, 2025 | |||||||||
| Net earnings | $ | 14,227 | $ | 14,629 | |||||||
| Interest and other, net | 2,275 | 2,344 | |||||||||
| Provision for income taxes | 4,520 | 4,628 | |||||||||
| Operating income | 21,022 | 21,601 | |||||||||
Income tax adjustment (1) | (5,115) | (5,189) | |||||||||
| NOPAT | $ | 15,907 | $ | 16,412 | |||||||
| Average debt and equity | $ | 64,124 | $ | 60,305 | |||||||
| ROIC | 24.8 | % | 27.2 | % | |||||||
—————
(1)Income tax adjustment is defined as operating income multiplied by our effective tax rate for the trailing twelve months.
(2)The fourth quarter of fiscal 2024 includes 14 weeks. All other quarters include 13 weeks. Consistent with our consolidated financial statements, periods presented only include operating results for acquisitions since their respective acquisition dates.
LIQUIDITY AND CAPITAL RESOURCES
At August 2, 2026, we had $2.1 billion in cash and cash equivalents, of which $1.4 billion was held by our foreign subsidiaries. We believe that our current cash position, cash flow generated from operations, funds available from our commercial paper program, and access to the long-term debt capital markets should be sufficient not only for our operating requirements, any required debt payments, and satisfaction of other contractual obligations, but also to enable us to invest in the business, fund dividend payments, and fund any share repurchases through the next several fiscal years. In addition, we believe that we have the ability to obtain alternative sources of financing, if necessary or appropriate.
Our material cash requirements include contractual and other obligations arising in the normal course of business. Our contractual obligations include long-term debt and related interest payments, operating and finance lease obligations, and purchase obligations. In addition to our cash requirements, we follow a disciplined approach to capital allocation. This approach first prioritizes investing in the business, followed by paying dividends, with the intent of then returning excess cash to shareholders in the form of share repurchases. In March 2024, we paused share repurchases in connection with the SRS acquisition and do not have plans to resume share repurchases in fiscal 2026 as we seek to reduce our outstanding debt.
During the first six months of fiscal 2026, we invested $1.7 billion back into our business in the form of capital expenditures. We plan to invest approximately $4 billion back into our business in the form of capital expenditures in fiscal 2026, in line with our expectation of approximately 2.5% of projected fiscal 2026 net sales. We expect to make investments across initiatives supporting our strategy of driving our core and culture, including building new stores and maintaining existing stores, delivering a frictionless interconnected experience, and winning with Pros. However, as in the past, we may adjust our capital expenditures to support the operations of the business, to enhance long-term strategic positioning, or in response to the economic environment, as necessary or appropriate. We may also utilize acquisitions to help accelerate our strategic initiatives.
In February 2026, we announced a 1.3% increase in our quarterly cash dividend from $2.30 to $2.33 per share. During the first six months of fiscal 2026, we paid cash dividends of $4.6 billion to shareholders. We intend to pay a dividend in the future; however, any future dividend is subject to declaration by our Board based on our earnings, capital requirements, financial condition, and other factors considered relevant by our Board.
In August 2023, our Board approved a $15.0 billion share repurchase authorization that replaced the previous authorization of $15.0 billion, which was approved in August 2022. The August 2023 authorization does not have a prescribed expiration date. As of August 2, 2026, approximately $11.7 billion of the $15.0 billion share repurchase authorization remained available.
Fiscal Q2 2026 Form 10-Q | 20 | ||||||
DEBT
We have a commercial paper program that allows for an aggregate of $11.0 billion in borrowings, and is supported by $11.0 billion of back-up credit facilities. At the beginning of fiscal 2026, these back-up credit facilities consisted of a five-year $3.5 billion credit facility scheduled to expire in May 2030, a 364-day $3.5 billion credit facility scheduled to expire in July 2026, a three-year $3.0 billion credit facility scheduled to expire in July 2028, and a 364-day $1.0 billion credit facility scheduled to expire in July 2026. During the second quarter of fiscal 2026, we entered into a new 364-day $4.5 billion back-up credit facility scheduled to expire in July 2027. This facility replaced our prior 364-day $3.5 billion and 364-day $1.0 billion back-up credit facilities, which were scheduled to expire in July 2026.
During the first six months of fiscal 2026, all of our short-term borrowings were under our commercial paper program. We utilized commercial paper borrowings to support general liquidity, including the repayment of long-term debt, and the maximum amount outstanding during the first six months of fiscal 2026 was $6.2 billion. At August 2, 2026, we had outstanding borrowings under our commercial paper program of $4.2 billion with a weighted average interest rate of 3.8%, we had no outstanding borrowings under our back-up credit facilities, and we were in compliance with all of the covenants contained in our back-up credit facilities, none of which are expected to impact our liquidity or capital resources.
We also issue senior notes from time to time. We did not have any issuances of senior notes during the first six months of fiscal 2026. During the first six months of fiscal 2026, we repaid an aggregate of $2.8 billion of senior notes at maturity.
The indentures governing our senior notes do not generally limit our ability to incur additional indebtedness or require us to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing our notes contain various covenants, none of which are expected to impact our liquidity or capital resources. We were in compliance with all such covenants at August 2, 2026. See Note 5 to our consolidated financial statements for further discussion of our debt arrangements.
CASH FLOWS SUMMARY
Operating Activities
Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, associate compensation, operations, occupancy costs, and income taxes. Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.
Net cash provided by operating activities increased by $2.5 billion in the first six months of fiscal 2026 compared to the first six months of fiscal 2025, primarily due to changes in working capital. Changes in working capital were primarily driven by timing of vendor payments and inventory management, along with the deferral of our fourth quarter fiscal 2024 estimated federal tax payment to the first quarter of fiscal 2025, which resulted in fewer income tax payments in the first six months of fiscal 2026 compared to the first six months of fiscal 2025.
Investing Activities
Net cash used in investing activities increased by $1.1 billion in the first six months of fiscal 2026 compared to the first six months of fiscal 2025, primarily resulting from higher cash paid for acquisitions during the first six months of fiscal 2026 compared to the first six months of fiscal 2025.
Financing Activities
Net cash used in financing activities in the first six months of fiscal 2026 primarily reflected $4.6 billion of cash dividends paid and $3.0 billion of repayments of long-term debt. Net cash used in financing activities in the first six months of fiscal 2025 primarily reflected $4.6 billion of cash dividends paid and $1.2 billion of repayments of long-term debt.
Fiscal Q2 2026 Form 10-Q | 21 | ||||||
CRITICAL ACCOUNTING ESTIMATES
During the first six months of fiscal 2026, there were no changes to our critical accounting estimates or our significant accounting policies as disclosed in the 2025 Form 10-K. Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements.
ADDITIONAL INFORMATION
For information on accounting pronouncements that have impacted or may materially impact our consolidated financial condition, results of operations, or cash flows, see Note 1 to our consolidated financial statements.
Recent insider activity
| Date | Insider | Role | Action | Shares | Price | Value |
|---|---|---|---|---|---|---|
| 2026-08-28 | Roseborough Teresa Wynn | EVP, Gen. Counsel & Corp. Sec. | Sell | -2,455 | $328.77 | -$807,130 |
| 2026-08-26 | Rowe Michael F. | EVP, Pro | Sell | -710 | $336.76 | -$239,100 |
| 2026-08-19 | McPhail Richard V | EVP & CFO | Sell | -5,989 | $348.40 | -$2,086,568 |
Source: SEC Form 4 filings.
Next expected filings
- ~2026-11-24 10-Q expected by 2026-12-11 (in 76 days)
- ~2027-03-17 10-K expected by 2027-03-31 (in 189 days)
- ~2027-05-26 10-Q expected by 2027-06-12 (in 259 days)
- ~2027-08-24 10-Q expected by 2027-09-10 (in 349 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-09-04 S-3ASR S-3ASR
- 2026-08-25 10-Q Quarterly Report
- 2026-08-21 8-K Officer/Director Change
- 2026-08-18 8-K Earnings Release; Financial Statements and Exhibits
- 2026-08-12 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-05-27 10-Q Quarterly Report
- 2026-05-19 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-07 DEF 14A Proxy Statement
- 2026-03-18 10-K Annual Report
- 2026-02-24 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-25 10-Q Quarterly Report
- 2025-11-24 8-K Bylaws/Articles Amended; Other Events; Financial Statements and Exhibits
- 2025-11-18 8-K Earnings Release; Financial Statements and Exhibits
- 2025-09-15 8-K Other Events; Financial Statements and Exhibits
- 2025-09-10 8-K Other Events; Financial Statements and Exhibits