Home Depot (NYSE:HD) executives said the retailer’s second-quarter performance exceeded its original forecast, supported by broad-based strength in core home-improvement categories, delivery investments and continued gains with professional customers despite pressure on consumer sentiment.
Richard McPhail, executive vice president and chief financial officer, and Billy Bastek, executive vice president of merchandising, discussed the company’s demand trends, pricing strategy, professional-customer initiatives, artificial-intelligence investments and capital allocation plans during a fireside chat.
Core Categories Supported Second-Quarter Demand
“The maintenance categories and really the core home improvement business has really held up terrifically well,” Bastek said, adding that performance was strong both in stores and online during the second quarter and first half.
McPhail said the company believes it is accelerating share gains in an environment where the broader sector remains pressured. He said Home Depot is continuing to invest in areas it can control, including associate tools, product assortment, supply chain capabilities, delivery and services for professional customers.
Management said it does not see a clear inflection point in the housing or consumer environment. McPhail said consumer sentiment has become more pressured over the last six quarters, while customers have the financial capacity to spend but remain uncertain about inflation, interest rates, fuel costs and employment concerns. That uncertainty has limited willingness to undertake large projects, he said.
Delivery Investments Seen as Competitive Advantage
Home Depot highlighted delivery as a central component of its interconnected retail and professional-customer strategy. Bastek said 65% of the company’s parcel shipments are delivered the same day or next day, while 55% of big-and-bulky products are delivered within two days.
The retailer has also expanded expedited store delivery, with a goal of delivering a majority of the assortment available in stores within two hours or less, according to McPhail.
McPhail said the company’s delivery capabilities reflect a strategy established more than a decade ago, centered on interconnected retail, store-based service and winning with professional customers. The company has expanded its flatbed distribution center network to handle high-cost deliveries more efficiently and to support a broader range and deeper inventory of products.
Everyday Pricing and Professional-Customer Expansion
Executives said tariff refunds disclosed during the second quarter were used to help maintain value for customers. McPhail said the company maintained its full-year guidance, including gross-margin guidance.
Bastek said Home Depot has emphasized everyday low pricing and has been less promotional as it works to offset higher input costs. The company plans to continue that approach through the second half of the year, he said, and expects average unit retail to remain relatively consistent with levels seen in the first half.
McPhail also outlined the company’s strategy to expand its share of the estimated $700 billion professional market within a $1.2 trillion total addressable market. While Home Depot’s stores remain the foundation of its professional business, the company has added outside sales, order-management capabilities, trade credit and delivery capacity to serve more complex projects.
He said the company has posted eight consecutive quarters of positive comparable sales with professional customers. The company’s acquisition of SRS was intended to add a specialty trade distributor with a service-oriented delivery model, while also enabling cross-selling with Home Depot, GMS and HD Supply.
McPhail said Home Depot expects to generate $400 million in cross-selling during 2026, primarily through joint sales efforts targeting home builders and large remodelers. He said the company expects a larger figure in 2027. About 90% of Home Depot stores have facilitated or closed a sale through SRS over the past 12 months, he said.
While certain acquired businesses operate in categories with margins below Home Depot’s company average, McPhail said professional customers representing more than half of Home Depot sales have a margin profile similar to consumer customers. Over time, the company aims to sell across the entire project and earn margins more reflective of its broader business, though product mix can affect results.
AI Focused on Speed, Productivity and Sales
The executives said artificial intelligence is being applied both to customer-facing tools and internal processes. McPhail cited adoption of material-list builders and project planners among professional customers, while Bastek pointed to opportunities in assortment planning, pricing, supply-chain optimization and store operations.
Bastek said AI-enabled tasking tools have helped improve productivity for the company’s merchandising execution team, freeing store associates to spend more time with customers. He said productivity from some of the early enablement has been “really terrific” and described the opportunity as still in its early stages.
McPhail said Home Depot has committed to several billion dollars of productivity improvements in its expense base over the next few years. However, he said the company intends to translate productivity into higher sales and compounding share gains rather than viewing the effort solely as a cost-cutting initiative.
On capital allocation, McPhail said Home Depot expects to return to a debt-to-EBITDA ratio of approximately 2 times by the middle of fiscal 2027. The company’s approach remains to reinvest in the business, pay dividends and then return excess capital through share repurchases. He said the retailer anticipates resuming repurchases by the end of the second quarter of 2027.
About Home Depot (NYSE:HD)
The Home Depot, Inc is a home improvement retailer that sells building materials, appliances, decor, hardware, tools, paint, lawn and garden products, and related merchandise. The company serves do-it-yourself customers, professional contractors, homebuilders, and other commercial customers through its retail stores and digital platforms.
Home Depot also provides services such as equipment and tool rental, delivery, installation, and project support. Its professional-focused offerings include job-lot quantities, specialized products, credit services, and account support designed for contractors and other trade customers.
Founded in 1978 by Bernie Marcus, Arthur Blank, Ken Langone, and Pat Farrah, the company is headquartered in Atlanta, Georgia.
