Q2 FY2026 results
| Metric | Result | Change |
|---|---|---|
| Total Sales | $47.9 billion | +5.7% |
| Adjusted Diluted EPS | $4.92 | +5.1% |
| Comp Sales | 1.7% | Not stated |
| Gross Margin | 33.7% | +25 basis points |
| Operating Margin | 14.3% | Not stated |
Guidance and outlook
- Comp sales are expected to range between flat to 2% growth.
- Total sales growth is projected between 2.5% and 4.5%.
- Diluted earnings per share and adjusted diluted earnings per share are expected to increase flat to 4%.
- Gross margin is expected to be approximately 33.1%.
- Operating margin is expected to be approximately 12.4% to 12.6%.
How management sounded
Positive (+5 on our -10 to +10 scale). Management expressed confidence in their strategy and market share gains while navigating a difficult macro environment, supported by a solid earnings beat and reaffirmed guidance. Management sounded more upbeat than on 6% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
Tariff Refunds and Margins
Asked: Analysts asked about the impact of the $685 million tariff refund and how it affects the P&L versus ongoing cost pressures.
Answer: Management explained that the refunds were used to offset unplanned cost pressures from fuel, energy, and commodities, and that the benefit is largely a Q2 and Q3 dynamic.
Consumer Demand
Asked: Analysts inquired whether the performance was due to company-specific actions or a broader reengagement in home improvement.
Answer: Management stated that they are taking share in a difficult environment and that while there is pressure on larger discretionary projects, their investments in store experience and delivery are resonating.
Housing Market
Asked: Analysts asked if higher interest rates are hurting demand or if the damage is already done.
Answer: Management noted that housing turnover is at historical lows and there is no sign of an inflection point, but they remain focused on controlling what they can.
SRS and GMS Integration
Asked: Analysts asked about the progress of cross-selling between SRS and GMS.
Answer: Management highlighted that 90% of stores have closed a sale through SRS in the last 12 months, and the integration is driving significant incremental sales to homebuilders and commercial customers.
What to watch before the next call
- The impact of ongoing housing market volatility and low turnover on future demand.
- The effectiveness of the nationwide rollout of Express Delivery in driving customer engagement.
- The integration progress and cross-selling success of the SRS and GMS acquisitions.
