The Home Depot (HD) Q2 FY2026 Earnings Call: Q&A Summary

Q: Chuck Grom from Gordon Haskett asked for comment on the broadening of category strength across 13 areas and the outlook for the back half.

A: Billy Bastek stated that 13 of 16 merchandising categories posted positive comps, with core businesses like electrical, plumbing, hardware, and tools performing exceptionally well, and noted that top-performing classes were heavily weighted toward the middle of the store rather than seasonal items.

Q: Chuck Grom from Gordon Haskett asked about the P&L mechanics of the $685 million tariff refund, expectations for future refunds, and the gross margin lap into next year.

A: Richard McPhail explained that they received $730 million in total tariff refunds, with $685 million reducing cost of goods sold and $45 million remaining in inventory. McPhail and Billy Bastek noted that these refunds offset unexpected cost pressures from fuel, energy, and Section 301 tariffs, leading to a reaffirmed guidance and a clean jumping-off point for 2027 without a recurring annual headwind.

Q: Scott Mushkin asked if an incremental 60 basis points of pressure should be assumed for Q3 and Q4 relative to the initial plan, and whether higher interest rates continue to hurt demand.

A: Richard McPhail clarified that tariff refunds offset costs primarily across Q2 and Q3, with Q4 gross margin expected to be roughly flat year-over-year. Regarding rates, McPhail noted that housing turnover has remained at historical lows for four years and has not shown an inflection point despite recent rate moves.

Q: Seth Sigman from Barclays asked about the widening gap between total comps and U.S. comps, international performance, and SRS comp trends.

A: Richard McPhail and Ann-Marie Campbell explained that the gap reflected a 25 basis point FX benefit alongside strong positive comps in Canada and Mexico. McPhail added that SRS comped above the company average across all verticals.

Q: Seth Sigman from Barclays asked how management views the full-year comp guidance scenarios relative to first-half performance and easier comparisons.

A: Richard McPhail stated that while Q3 started consistently with Q2, macroeconomic volatility, frozen housing conditions, and unplanned cost pressures justify maintaining the prudent full-year guidance range.

Q: Michael Lasser from UBS asked how much of the comp acceleration was driven by market share gains versus sector improvement, and whether evidence points to a demand bottom.

A: Richard McPhail, Ann-Marie Campbell, Billy Bastek, and Jordan Broggi emphasized that market data indicates continued pressure on housing-related sectors, meaning Home Depot's acceleration is driven by share gains supported by record on-shelf availability, digital growth up 11%, express delivery launches, and millions of queries on the Magic Apron app.

Q: Michael Lasser from UBS asked to walk through the drivers of gross margin pressure excluding tariff refunds and whether they are ongoing or onetime.

A: Richard McPhail detailed that approximately 60 basis points of pressure came from increased costs offset by tariffs, and another 60 basis points came from GMS and Mingledorff's acquisition mix, expressing confidence that underlying expectations were met.

Q: Kate McShane from Goldman Sachs asked about the drivers within ticket, including same-SKU inflation and single-purchase items.

A: Billy Bastek replied that ticket was driven by same-SKU AUR inflation from input costs, single-purchase items in categories like portable power, refrigeration, and patio, and inter-category trade-ups.

Q: Christopher Horvers from JPMorgan asked how to interpret monthly cadence given weather headwinds in May and heat-driven acceleration in July.

A: Billy Bastek explained that extreme heat shifted from June in 2025 into July in 2026, and that extracting a single week of severe weather in early May normalized May's performance to match June and July.

Q: Zachary Fadem from Wells Fargo asked about cross-selling expectations between SRS and GMS and how it builds through the year.

A: Richard McPhail, Ann-Marie Campbell, and Michael Rowe explained that cross-sell encompasses the entire Home Depot and SRS ecosystem, with 90% of stores having closed a quote center sale via SRS within the last twelve months and new B2B and delivery capabilities driving Pro wallet share.