Home Depot reported fiscal 2026 second-quarter results for the period ended August 2, with sales of $47.9 billion, up 5.7% year over year and surpassing Wall Street's expectation of approximately $47.27 billion. Adjusted earnings per share came in at $4.92, beating the $4.73 consensus and climbing 5.1% from a year earlier. Comparable store sales rose 1.7%, with U.S. comps up 1.3%, marking the strongest performance since the third quarter of 2022. CFO Richard McPhail noted demand is broad-based, with customers continuing to tackle "smaller projects." The company reaffirmed its full-year guidance without raising it, and shares initially gained in premarket trading before giving back those gains.

Traffic Declines, Ticket Sizes Rise: Survival Mode in a Frozen Housing Market

Comparable transaction counts fell 1%, while average ticket rose 2.8% to approximately $92.50, up from $90.01 in the same period last year. Total transactions reached 443.2 million, down 0.8%. Big-ticket transactions above $1,000 grew 2.4% year over year. The pattern remains consistent: customers visit less frequently but buy more per trip, with major renovations giving way to paint, garden, hardware, and repair categories. McPhail described the operating environment as a "frozen housing market"—low turnover, high interest rates, and homeowners who have spending capacity but are hesitant to start projects.

Monthly comps accelerated through the quarter: May at 1.2%, June at 1.5%, and July at 2.3%, with U.S. comps improving from 0.5% to 1.2% and then 2.2%. Thirteen of 16 merchandise divisions posted positive comps, including storage, electrical, hardware, power tools, plumbing, indoor garden, kitchen, paint, bath, outdoor garden, building materials, flooring, and lumber. Pro customer performance outpaced DIY. Professional-oriented categories such as portable power, patio, decking, dimensional lumber, pipe fittings, fasteners, hand tools, and concrete showed particular strength. Digital channel sales grew 11%, marking the fifth consecutive quarter of double-digit growth. Canada, Mexico, and the northern and western United States all posted positive comps.

Gross margin was approximately 33.7%, improving roughly 25 basis points, driven primarily by IEEPA tariff refunds offsetting fuel, energy, and other input costs, partially offset by structural changes from acquisitions like GMS and Mingledorff's. Operating margin was 14.3%, slightly below last year's 14.5%, while adjusted operating margin came in at 14.7%, modestly below 14.8%. Net income was approximately $4.8 billion, or $4.79 per diluted share.

Full-Year Guidance Unchanged: Tariff Refunds Offset Costs, Not a Housing Recovery Signal

The company reaffirmed fiscal 2026 guidance: total sales growth of approximately 2.5%–4.5% (including GMS acquisition, new stores, new branches, and bolt-on acquisitions), comps ranging from flat to 2% growth, roughly 15 new store openings, gross margin around 33.1%, operating margin of approximately 12.4%–12.6% (12.8%–13% adjusted), an effective tax rate of about 24.3%, net interest expense of roughly $2.3 billion, and EPS and adjusted EPS growth of flat to 4% versus $14.23 and $14.69 in fiscal 2025. The guidance explicitly incorporates tariff refunds, which partially offset unplanned fuel, energy, and commodity costs. McPhail stated the refunds allow the company to "hold the line on value" even as other costs rise.

Holding guidance steady effectively acknowledges that the strong second quarter is not enough to reshape the full-year trajectory. The upper end of total sales guidance depends on acquisitions and store openings, while comp upside remains capped at 2%. The SRS professional channel is guided to mid-single-digit organic growth for the year, with plans to open 40–50 new branches. This is a strategy of maintaining momentum through market share gains and Pro customer focus in the absence of a housing turnaround.

CEO on Leave, Lowe's Earnings Up Next

At the time of the earnings release, CEO Ted Decker had begun a multi-month temporary medical leave, with daily operations led by McPhail and Ann-Marie Campbell, Senior Executive Vice President of U.S. stores. The conference call featured both executives along with Billy Bastek, Executive Vice President of Merchandising. Management emphasized that investments are paying off and that both Pro and retail segments are gaining share, but offered no timeline for when housing turnover might thaw.

Lowe's is scheduled to report second-quarter results on August 19, with analysts expecting EPS of approximately $4.23 on revenue of roughly $26.1 billion, and the same full-year comp guidance of flat to 2% growth. Home Depot trades at a forward P/E of about 24x, versus approximately 18x for Lowe's. Oppenheimer prefers Lowe's "self-improvement" potential, while Stifel raised its price target on Home Depot to $340 but maintained a Hold rating, citing valuation that already prices in a more substantial housing and home improvement recovery. July U.S. housing starts plunged 12.4%, with single-family starts at their slowest pace since late 2022, providing the macro backdrop for this report.

Implications for Consumer and Rate-Sensitive Sectors

Home Depot demonstrates that with mortgage rates hovering around 6.7% and transaction volumes frozen, repair and outdoor project spending can still deliver positive comps that accelerate month over month. This supports the thesis that American consumers haven't disappeared—they've simply deferred big-ticket purchases—and explains why the company feels confident maintaining its annual outlook. However, it also confirms that housing-related discretionary spending has not returned: traffic has declined for multiple consecutive quarters, and a portion of total sales growth stems from acquisitions. Tariff refunds improved gross margin but represent a one-time policy benefit that cannot be extrapolated into structural profitability.

For the stock, beating expectations without raising guidance is a signal that the "frozen housing" narrative continues to discount growth. For Lowe's, building materials, and furniture, the key comparison points are the Pro-versus-DIY divergence and whether big-ticket transactions can remain positive. For bonds and rates, this report indicates that high interest rates have reshaped the structure of home improvement spending rather than eliminated demand. Until housing turnover recovers, Home Depot remains a company driven by ticket size, market share, and tariff refunds—not an early leading indicator of a housing cycle turnaround.