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HD | Earnings Review — FY2026Q2

Verdict: share-gain in a frozen housing tape, not a cycle turn. Comps inflected to the best print since 2022 and adj EPS flipped positive, but the earnings beat is IEEPA-funded, operating margin is still compressing, and management reaffirmed FY2026 after a beat — the opposite of a raise-the-year setup.

Print (double beat vs FMP; Mixed beater recovering). Net sales $47,861 million (+5.7% YoY vs $45,277 million) beat FMP $47.24B by +$0.62B / +1.3%. Adj diluted EPS $4.92 (+5.1% YoY vs $4.68) beat FMP $4.73 by +$0.19 / +4.0%. GAAP EPS $4.79 also cleared the $4.73 bar. Total comps +1.7% (+110 bps vs Q1 +0.6%; +70 bps vs last Q2 +1.0%) — ticket +2.8%, transactions still −1.0%. U.S. comps +1.3% trail total by 40 bps (call: FX ~+25 bps; Canada/Mexico/SRS outcomped).

Quality of earnings. Q2 received $730 million of IEEPA tariff refunds; $685 million reduced COGS (~145 bps) and $45 million remains in inventory (call; no Daloopa series). That credit is ~$0.52/share after 24.5% tax on 996 million diluted shares — ~2.7× the $0.19 Street beat. Gross margin 33.7% (+26 bps vs 33.4%) is McPhail’s bridge: +145 IEEPA − ~60 unplanned fuel/energy/inputs − ~60 GMS/Mingledorff’s mix. Strip the refund and GM is ~−115 to −120 bps. Adj operating margin still compressed 10 bps to 14.7% because opex ran ~+45 bps of sales to 19.4%. Do not annualize 33.7%.

Guidance. FY2026 unchanged (sales +2.5%–+4.5%, comps flat to +2.0%, GM ~33.1%, adj OM 12.8%–13.0%, adj EPS flat to +4% vs FY2025 $14.69). New qualitative plug: IEEPA is inside the box as a full-year offset to unplanned costs — a timing wash, not a margin gift. FMP FY2026E $171.51B / $14.99 sits ~60 bps above sales mid / on EPS mid. H1 sales +5.3% and comps ~+1.2% are inside/above the box; 2H mid sales +1.6% is a ~370 bp deceleration vs H1, mostly the GMS anniversary.

Tone. McPhail (interim PEO; Decker on medical leave): Q2 “exceeded our expectations,” Q3 start “really consistent” with Q2 demand, “took share in a difficult environment,” housing turnover “no sign of an inflection.” Then kept the range: “extremes become less likely,” “back at the end of Q3.” Q1 defended the low; Q2 defended not raising.

Contradictions (4 hard). $50B vs $22B underspend with no bridge; $1,000+ big-ticket KPI positive for five quarters vs CEO “have not seen the increase”; lock-in flipped from stay-and-renovate to repair-not-replace; Q2 refunds “fully offset” unplanned costs vs “would have beaten without them.”

Upcoming catalyst. 2026-11-17 FY2026Q3. The stock-moving number is Q3 GM vs the refund roll-off, not another sub-2% positive-comp print. FMP Q3 $42.78B / $3.85.

HD’s organic engine is comps = ticket + transactions. Reported sales still include SRS (closed June 2024) and GMS (closed September 2025). Headline profitability is adjusted operating margin and adjusted diluted EPS. FY2024 was a 53-week year — Q4'25 sales −3.8% is the extra week rolling off, not a demand break (comps still +0.4%).

Revenue drivers

| Driver | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 | Q2'26 | |---|---:|---:|---:|---:|---:|---:|---:|---:| | Total comps | −1.3% | +0.8% | −0.3% | +1.0% | +0.2% | +0.4% | +0.6% | +1.7% | | comp accel (bps) | +200 | +210 | −110 | +130 | −80 | +20 | +20 | +110 | | U.S. comps | −1.2% | +1.3% | +0.2% | +1.4% | +0.1% | +0.3% | +0.4% | +1.3% | | Comp transactions | −0.6% | +0.6% | −0.5% | −0.4% | −1.6% | −1.6% | −1.3% | −1.0% | | Comp avg ticket | −0.8% | +0.2% | +0.3%* | +1.4% | +1.8% | +2.4% | +2.2% | +2.8% | | Big-ticket >$1,000 | −6.8% | +0.9% | +0.3% | +2.6% | +2.3% | +1.3% | +0.8% | +2.4%† | | Other net sales ($M) | $2,928 | $2,204 | $2,569 | $3,120 | $3,890 | $3,138 | $4,002 | n/a‡ | | Retail stores (EOP) | 2,345 | 2,347 | 2,350 | 2,353 | 2,356 | 2,359 | 2,361 | 2,364 | | SRS locations (EOP) | — | — | — | — | 1,200 | 1,250 | 1,280 | 1,340 |

* Daloopa series 233363 unpopulated for 2025Q1; +0.3% is the IR/Q1-review figure. † Q2'26 big-ticket +2.4% and online comps +11% (fifth consecutive double-digit quarter) are management-stated — Daloopa series not loaded as of 2026-08-22. ‡ Q2'26 primary/other segment sales not in Daloopa.

Driver read. Comps have re-accelerated. After a two-year trough, the path is −1.3% → +0.8% → −0.3% → +1.0% → +0.2% → +0.4% → +0.6% → +1.7% — strongest quarter since 2022. Ticket is doing the work (cycle high); transactions are still negative but less bad than the −1.6% Q3/Q4'25 trough. Monthly comps on the call (May +1.2% / June +1.5% / July +2.3%) rose through the quarter; Bastek says weather-normalize and May ≈ June ≈ July. The ~400 bp gap between reported sales YoY (+5.7%) and comps (+1.7%) is GMS / Mingledorff’s + new stores. That lap starts in Q3.

Consolidated P&L

| Metric | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 | Q2'26 | |---|---:|---:|---:|---:|---:|---:|---:|---:| | Net sales ($M) | 40,217 | 39,704 | 39,856 | 45,277 | 41,352 | 38,198 | 41,765 | 47,861 | | Sales YoY % | +6.6 | +14.1 | +9.4 | +4.9 | +2.8 | −3.8 | +4.8 | +5.7 | | Gross profit ($M) | 13,425 | 13,034 | 13,459 | 15,125 | 13,815 | 12,466 | 13,781 | 16,115 | | GM % (calc.) | 33.4 | 32.8 | 33.8 | 33.4 | 33.4 | 32.6 | 33.0 | 33.7 | | GM YoY (bps) | −40 | −25 | −37 | +2 | +3 | −19 | −77 | +26 | | Operating income ($M) | 5,418 | 4,495 | 5,133 | 6,555 | 5,353 | 3,849 | 4,981 | 6,839 | | GAAP OM | 13.5% | 11.3% | 12.9% | 14.5% | 12.9% | 10.1% | 11.9% | 14.3% | | Adj. OI ($M) | 5,556 | 4,640 | 5,272 | 6,694 | 5,511 | 4,020 | 5,152 | 7,017 | | Adj OM | 13.8% | 11.7% | 13.2% | 14.8% | 13.3% | 10.5% | 12.3% | 14.7% | | Adj OM YoY (bps) | −70 | −40 | −90 | −50 | −50 | −120 | −90 | −10 | | GAAP EPS ($) | 3.67 | 3.02 | 3.45 | 4.58 | 3.62 | 2.58 | 3.30 | 4.79 | | Adj EPS ($) | 3.78 | 3.13 | 3.56 | 4.68 | 3.74 | 2.72 | 3.43 | 4.92 | | Adj EPS YoY % | −1.8 | +9.4 | −3.0 | +0.2 | −1.1 | −13.1 | −3.7 | +5.1 |

Adj op margin has compressed every comparable quarter in this window. Q2’s −10 bps is the least bad print since Q2'24, not an expansion. Ticket is the accelerating line; traffic is not.

Absolute sales — 12 quarters ($B)

YoY — sales, comps, ticket (12 quarters)

Annual arc (FY2021–FY2025)

| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | |---|---:|---:|---:|---:|---:| | Net sales ($M) | 151,157 | 157,403 | 152,669 | 159,514 | 164,683 | | Sales YoY % | +14.4 | +4.1 | −3.0 | +4.5 | +3.2 | | Total comps | +11.4% | +3.1% | −3.2% | −1.8% | +0.3% | | Primary (retail) sales ($M) | — | — | 152,669 | 153,108 | 151,966 | | Other net sales ($M) | — | — | — | 6,406 | 12,717 | | GAAP OM | 15.2% | 15.3% | 14.2% | 13.5% | 12.7% | | Adj OM | — | — | 14.3% | 13.8% | 13.1% | | Adj diluted EPS ($) | — | — | 15.25 | 15.24 | 14.69 |

FY25 sales growth is M&A, not the box: retail sales fell while other net sales doubled. GAAP op margin has ground 15.2% → 12.7% (−250 bps over four years). H1'26 sales +5.3% is above the FY +2.5–4.5% envelope; H1 adj EPS is only +1.3% ($8.35 vs $8.24) — the EPS guide still needs 2H operating leverage that Q2 did not deliver ex-refund.

FY2026Q2 was a clean double beat on the two Street lines — and the largest EPS surprise since the optical Q4'25 53rd-week print. The EPS beat is real versus FMP and not purely non-GAAP. It is not a clean demand/operating beat.

| Metric | Consensus (FMP) | Actual (Daloopa) | Variance | Result | |---|---:|---:|---:|---| | Adj diluted EPS | $4.73 | $4.92 | +$0.19 / +4.0% | BEAT | | GAAP diluted EPS | n/a (Street tracks adj) | $4.79 | +$0.06 / +1.3% vs $4.73 | Beat even on GAAP | | Net sales | $47.243B | $47.86B | +$0.62B / +1.3% | BEAT | | Total comps | not in FMP | +1.7% | vs LY +1.0% | Beat vs mgmt plan | | Adj operating margin | n/a | 14.7% | −10 bps YoY | Compressed with the refund | | Gross margin (calc.) | n/a | 33.7% | +26 bps YoY | IEEPA-funded |

UBS (Lasser) put the Street debate on the record: did HD miss consensus profitability ex-refund? ~117 bps of GM pressure checks: 33.7% − 145 bps ≈ 32.25% vs ~33.4% last Q2. McPhail did not dispute the arithmetic. He said they “would have exceeded our expectations for the quarter regardless. It just came in a different form.”

Heatmap — last 8 quarters

| Window | EPS beat rate | Sales beat rate | Avg EPS surprise | Avg sales surprise | |---|---|---|---|---| | Last 4Q (Q3'25–Q2'26) | 3/4 = 75% | 4/4 = 100% | +7.8¢ / +2.4% | +0.6% | | Last 8Q (Q3'24–Q2'26) | 5/8 = 62.5% | 7/8 = 87.5% | +4.4¢ / +1.4% | +0.9% | | Last 12Q (Q3'23–Q2'26) | 9/12 = 75% | 10/12 = 83% | +4.9¢ / +1.5% | +1.2% |

Pattern: Mixed — recovering, not a consistent beater. Three consecutive EPS misses in FY2025 Q1–Q3 (−4¢ / −4¢ / −9¢) remain the blemish. This print lifts L4 EPS from 50% → 75% and L4 sales from 75% → 100%. Magnitude is improving off the trough, but the two largest recent EPS beats are tainted — Q4'25 by a 53rd week, this quarter by ~$0.52/share of IEEPA. Strip Q4'25 and L4 average surprise is +0.8%. Sales-beat magnitude +1.3% is the largest since Q1'25 / Q2'24 and is not an IEEPA story.

They are not a sandbagger. FY guide was reaffirmed, not raised, despite McPhail’s “exceeded our expectations.”

HD issues annual guidance only (no FQ+1 range). FY2026 was set on the FY2025Q4 call, reaffirmed on Q1, and reaffirmed unchanged again on Q2. The only new disclosure: the same ranges now explicitly include IEEPA refunds used to offset unplanned fuel, energy, and other product input costs.

FY2026 box (reaffirmed 18 Aug — identical vs May 19 and vs Feb initiation)

| Line item | Initiated FY2025Q4 | Prior (Q1, 19 May) | New (Q2, 18 Aug) | Change | |---|---:|---:|---:|---| | Total sales growth | +2.5%–+4.5% | +2.5%–+4.5% | +2.5%–+4.5% | Unchanged | | Implied sales ($M) | 168,800–172,094 | 168,800–172,094 | 168,800–172,094 (mid 170,447) | Unchanged | | Comparable sales | Flat to +2.0% | Flat to +2.0% | Flat to +2.0% | Unchanged | | Gross margin | 33.1% | 33.1% | 33.1% | Unchanged | | Operating margin | 12.4%–12.6% | 12.4%–12.6% | 12.4%–12.6% | Unchanged | | Adj. operating margin | 12.8%–13.0% | 12.8%–13.0% | 12.8%–13.0% | Unchanged | | Adj. EPS growth | Flat to +4% from $14.69 | Flat to +4% | Flat to +4% from $14.69 | Unchanged | | Implied adj EPS ($) | 14.69–15.28 | 14.69–15.28 | 14.69–15.28 (mid 14.98) | Unchanged | | Tax rate / net interest | 24.3% / $2.3B | Same | 24.3% / $2.3B | Unchanged | | Capex / new stores | 2.5% of sales / 15 | Same | 2.5% / 15 | Unchanged | | IEEPA caveat | Not in the printed box | Refunds “could provide a significant offset” (amount n/d) | Refunds now inside the box; fully offset unplanned costs; no annual GM benefit | New qualitative inclusion |

HD does not guide EBITDA. McPhail: the extremes of the range are less likely this far into the year — a soft narrowing without moving the printed low/high.

Waterfall — FY2026 sales ($B): prior mid → new mid → FMP

Ranges did not move. The entire “change” is Street sitting above mid.

Q2 GM bridge (the quality-of-earnings chart)

FQ+1 (Q3) — company does not guide the quarter

| Topic | Q2 call language | Implication for Q3 | |---|---|---| | Demand run-rate | “Start to Q3 that’s really consistent with the demand we saw in the second quarter.” | Comps near +1.7% if they meant it. | | Gross margin timing | Refunds book when cash arrived (Q2). Offset is “largely a Q2 and Q3 dynamic.” Q4 GM “right around flat.” | Q3 GM should give back a large piece of Q2’s +26 bps. | | GMS mix | ~60 bps Q2 GM drag; GMS closed Sep-2025. | Mix drag rolls off through 2H. | | Street (FMP) | No company range | Sales $42.784B (+3.5% vs $41,352 million); EPS $3.85 (+2.9% vs adj $3.74). Street long sales vs implied mid, in-line on EPS. |

Implied 2H vs 1H (the real guide)

1H FY2026 sales = $41,765 million + $47,861 million = $89,626 million vs 1H'25 $85,133 million → +5.3%. 1H adj EPS = $3.43+$4.92 = $8.35 vs $8.24 → +1.3%.

| 2H FY2026 implied | Low | Mid | High | Street (FMP Q3+Q4) | |---|---:|---:|---:|---:| | Sales ($M) | 79,174 | 80,821 | 82,468 | 81,981 | | Sales YoY | −0.5% | +1.6% | +3.7% | +3.1% | | Adj EPS ($) | 6.34 | 6.63 | 6.93 | 6.69 | | Adj EPS YoY | −1.9% | +2.7% | +7.2% | +3.5% |

Q2 printed +5.7% sales / +1.7% comps / +5.1% adj EPS. FY mid needs +3.5% / +1.0% / +2.0%. 2H mid sales +1.6% is a ~370 bp deceleration vs 1H, mostly the GMS anniversary. 1H comps ~+1.2%; FY mid +1.0% implies 2H comps at or slightly below 1H, and below Q2. Street 2H sales +3.1% sits near company high. Management would not bless that.

Why the FY box still fits (and where it is tight)

• Sales / comps — on track. 1H sales +5.3% is M&A-heavy. Organic comps ~1.2% vs FY 0–2%: slightly above mid, well inside. Core U.S. is +1.3%, not +1.7%. A guide that assumes traffic does not turn is consistent with the tape.
• Gross margin — 33.1% is a 2H reset. 1H GM ≈ 33.4%. Hitting 33.1% FY needs 2H GM ~32.8% — Q3 gives back the refund, Q4 “flat” vs Q4'25 32.6%. Internally consistent. Easiest line to miss if energy/resin/metals stay bid and they refuse to take price.
• Operating margin — H1 is above the FY box; H2 is seasonally lower. 1H adj OM 13.6% vs FY 12.8–13.0%. Implied 2H GAAP OM at mid ≈ 11.7% vs 2H'25 11.6% — basically flat. FIFA OpEx in Q2 is a one-quarter lump.
• EPS — 1H +1.3% adj vs FY 0–4%. Q2 did the catching-up. 2H mid +2.7% is achievable if Q3 EPS is ~$3.84 (Street $3.85). Tight to the high end unless comps stay at Q2.

FY2025 tracker (last closed year)

They missed the original FY2025 box on comps, OM, and EPS, cut at Q3, then beat the cut. GM they historically hit “on the button.” That is informative conservatism after a cut, not 100% sandbagging. FY2026’s 200 bp comps / 400 bp EPS ranges at the second reaffirm are still wide for August.

One-line verdict: Reported sales YoY re-accelerated only +92 bps to +5.7% (still GMS-inflated). Comps are the real step-up (+110 bps to +1.7%). Adj EPS flipped to +5.1% on IEEPA-timing GM, not operating leverage.

| Metric | Q3'24 | Q4'24 | Q1'25 | Q2'25 | Q3'25 | Q4'25 | Q1'26 | Q2'26 | |---|---:|---:|---:|---:|---:|---:|---:|---:| | Revenue YoY % | +6.6 | +14.1 | +9.4 | +4.9 | +2.8 | −3.8 | +4.8 | +5.7 | | Rev Accel (bps) | +604 | +749 | −470 | −457 | −205 | −662 | +858 | +92 | | Adj EPS YoY % | −1.8 | +9.4 | −3.0 | +0.2 | −1.1 | −13.1 | −3.7 | +5.1 | | EPS Accel (bps) | −160 | +1,126 | −1,244 | +321 | −127 | −1,204 | +948 | +878 |

Accel = quarter-to-quarter change in the YoY rate (second derivative — never sequential dollars across seasons).

| # | Quarter | Signal | Evidence | Durable? | |---|---|---|---|---| | 1 | Q4'24 peak | Reported-sales / EPS spike | Revenue YoY +14.1%; adj EPS +9.4%. SRS first full Q4 + FY2024 53rd week. Comps only +0.8%. | No. Calendar + M&A. | | 2 | Q4'25 optical trough | Sales −3.8%, adj EPS −13.1% | Extra week was ~6.3% of year-ago Q4. Comps still +0.4%. | No as demand. Yes as a margin problem. | | 3 | Q1'26 turn | First large positive accel after the fade | Revenue YoY +4.8% (+858 bps); adj EPS still −3.7%. Comps +0.6%. GMS now in the stack. | Partial. Sales turn is M&A-assisted. | | 4 | Q2'26 just-reported | Organic step-up; EPS back to growth | Sales +5.7% (+92 bps); adj EPS +5.1% (+878 bps); comps +1.7% (+110 bps), 8Q high. | Comps: maybe. Reported +5.7%: no — GMS laps in Q3. EPS +5.1%: qualified — IEEPA is Q2/Q3 timing. |

Trajectory-over-absolutes: a 6% grower that just added 90 bps of rate is better than a 6% grower rolling over — if the rate is organic. It is not fully organic. Comps at +1.7% are the honest number, and that series did inflect. The investment case at this print is “taking share in a still-soft market with a 2H GMS lap and a Q3 GM timing give-back,” not “home improvement has inflected.”

Next scheduled print: 2026-11-17 (FY2026Q3). The debate into Q3 is not whether HD can print another positive-comp quarter in a frozen housing tape — Q2 already did that at +1.7%, and McPhail said the start of Q3 is “really consistent” with that demand. It is whether Q3 gross margin can absorb the IEEPA refund roll-off without a guide cut.

| # | Catalyst | Timing | Consensus / watch | Implication | |---|---|---|---|---| | 1 | Q3 print + first real FY guide update | Tue 2026-11-17 | FMP Q3 $42.78B / $3.85 (+3.5% / +2.9% YoY). FY FMP $171.51B / $14.99. | Highest-conviction near-term setup. A reaffirm is the base case (already done twice). Watch Q3 GM vs Q2’s 33.7% more than the sales print. | | 2 | IEEPA refund roll-off / Q3–Q4 GM cadence | Intra-Q3; clean read in Q4 | FY GM still ~33.1%. “Immaterial” more IEEPA in 2H. | The Q3 P&L landmine. GMS mix (~60 bps) laps in Q3 (tailwind) but the 145 bp refund does not repeat. | | 3 | Comp trajectory / ticket vs traffic | Continuous | FY midpoint +1.0% on H1 ~+1.2% implies 2H similar to H1, below the Q2 trend. | A Q3 comp ≥+1.5% with transactions still negative is a share story. Traffic turning positive would force a raise. | | 4 | Housing turnover / FOMC | FOMC Sep 15–16; NAR Sep 10 | Street is not underwriting an inflection. | The only catalyst that re-rates the housing cycle — and it is outside HD’s control. Do not treat +1.7% comps as evidence the housing stock is turning over. | | 5 | SRS / GMS / $400M cross-sell | GMS mix laps in Q3 | FY SRS organic still mid-single-digit. McPhail would not phase the $400M. | Q3 is the first quarter GMS is in both years. SRS 2H needs a storm curve NOAA’s below-normal outlook does not promise. | | 6 | Express Delivery nationwide + 2H app refresh | Launched print day | Online already five-quarter double-digit (+11% call). | Company-controllable, not a 2026 P&L needle-mover on day one. | | 7 | Ted Decker return / Office of the CEO | “A few months” from 2026-08-12 → Oct–Nov | Not in FMP. | Sentiment catalyst unless the return slips past the Q3 call. | | 8 | Lowe’s competitive gap | LOW printed 2026-08-19 | HD comps +1.7% vs LOW +0.2%. LOW cut FY to the bottom. | If the gap was HD using IEEPA to buy share, Q3 (refund mostly gone) is the clean test. |

Bull path not in the $14.99: Q3 transactions turn positive and comps print ≥+2% with SRS MSD organic visible; a rate step-down that lifts existing-home sales.

Bear path under-discounted: Q3 GM prints like the ex-refund Q2 (−100 bp class) and the FY 33.1% / 12.8–13.0% adj OM band gets cut; below-normal hurricane season leaves SRS short of MSD organic; Decker’s “few months” slips past November.

Call 2026-08-18. Speakers: Richard McPhail (CFO, interim PEO), Ann-Marie Campbell, Billy Bastek. Ted Decker did not speak. Eight sell-side names; dual-part asks scored separately.

The street spent the hour pressure-testing one idea: Q2 looked like an inflection only because IEEPA reduced COGS by $685 million, and FY guidance was reaffirmed rather than raised. Management was unusually precise on the refund bridge and Q4 GM cadence, and unusually vague on everything that would let the Street raise the year.

| # | Analyst | Topic | Grade | What they got / didn’t | |---|---|---|---|---| | 1a | Chuck Grom, Gordon Haskett | 13/16 departments; back-half merch | Well answered | Named departments; only 3 of top 20 seasonal. “Middle of the store.” | | 1b | Grom | $685M refund P&L and 2027 lap | Well answered | $730 / $685 / $45; 145 / 85 / 60 / 25 bps; Q2→Q3 shift; 2027 annual lap = none. | | 2a | Scot Ciccarelli, Truist | 60 bps incremental in Q3 and Q4? | Well answered | No. Q2/Q3 dynamic. Q4 GM “right around flat.” | | 2b | Ciccarelli | Do higher rates still hurt? | Well answered | Turnover at historic lows for four years; “no sign of an inflection.” | | 3a | Seth Sigman, Barclays | Total vs U.S. comps gap | Well answered | FX ~25 bps; Canada/Mexico outcomped; SRS positive all verticals. | | 3b | Sigman | 2H comps vs Q2 trend; why keep a wide range | Deflected | Q3 start “consistent with Q2”; range “remains appropriate”; “extremes less likely.” No 2H algorithm. | | 4a | Michael Lasser, UBS | Share vs market; has demand bottomed? | Deflected | “Took share / market still terrible.” Zero split of the 110 bps. Capability tour instead. | | 4b | Lasser | ~117 bps GM pressure ex-refund | Well answered | ~60 cost + ~60 mix. “Would have exceeded expectations regardless.” | | 5a | Kate McShane, Goldman | Ticket: AUR vs mix vs units | Deflected | “Some same SKU, AUR.” No bps split of +2.8%. | | 5b | McShane | If ticket holds and traffic ticks, is +2% too low? | Deflected | “That’s the math… prudent… back at the end of Q3.” | | 6a | Chris Horvers, JPM | Monthly cadence / weather | Well answered | Heat-week shift + week-14 storms. Underlying May ≈ June ≈ July. Not a July breakout. | | 6b | Horvers | SRS 2H / total–U.S. gap | Well answered | MSD organic reaffirmed; Q4'25 shingle −27%/−29%; QuoteCenter 90% of stores. | | 6c | Horvers | SG&A shift; 2027 clean jump-off | Well answered | FIFA in Q2 opex; year lands on plan; 2027 “clean” annually. | | 7a | Zhihan Ma, Bernstein | Back-half AUR / price reinvestment | Deflected | “Factored into the guide.” No sign, no magnitude. | | 7b | Ma | Org realignment: why now | Deflected | Three slogans. Asked six days after CEO leave. | | 8a | Zach Fadem, Wells | $400M cross-sell cadence | Deflected | FY target restated; Q2 actual and 2H build refused. | | 8b | Fadem | Fuel/freight transitory vs contract | Well answered | “Market-borne” fuel/energy/inputs. Not a multi-year freight contract. |

What they would answer: the accounting of a one-time item in more detail than almost any large-cap retailer. What they would not: the run-rate. Reaffirm-and-defer after beating and after describing a Q3 start in-line with Q2 is the most important negative signal for anyone trying to mark FY comps to the Q2 exit rate. No analyst asked about Decker’s leave.

Four genuine contradictions, ranked by materiality. Several near-misses that look like flip-flops are internally consistent — noted as yellow tensions.

Checked, no contradiction: FY2026 guide path is reaffirm-only. Q2 print vs IR vs Daloopa match. Q1 store-count slip was same-call corrected. SRS comps Q1 “slightly negative” → Q2 positive all verticals is sequential, not a reverse. Tariff-refund quantum was a new cash event after Q1, not a restatement.

Headline: HD is taking Pro/SRS share in a still-frozen housing market. IEEPA refunds are sector-wide timing, not a margin expansion to annualize. Do not upgrade the housing complex on this print.

Macro

1. Housing is frozen, not inflecting. Four years at ~3% turnover; recent rate-up has not reopened the hole; rate-down is the only identified catalyst; Q3 demand has opened in line with Q2. Treat HD’s beat as idiosyncratic share.
2. The consumer is in repair-and-maintain mode. 13/16 departments, middle-of-store, Pro > DIY, ticket +2.8% / transactions −1.0%, financed large-ticket still dead. Canada’s transaction-and-unit positive print is the exception.
3. Inflation is real; the refund is not a margin expansion. ~60 bps unplanned fuel/energy/resin/metals/Section 301, fully offset on the year by $730 million of IEEPA cash that the rest of the import market also received. Q3 GM timing reverse; Q4 ~flat; 2027 jumping-off point “clean.”
4. The industrial winner is HD’s Pro complex, not the housing complex. SRS positive in all verticals and taking share; GMS/USG/RUCO pulling interiors into the box; Milwaukee battery lock-in; QuoteCenter internalized.

Named and implied

| Name | Relationship | HD datapoint | Implication | |---|---|---|---| | LOW | Direct peer | HD comps +1.7% vs LOW +0.2%; IEEPA “not unique to HD”; Pro > DIY | Worse relative. DIY-skewed LOW is on the wrong side of Pro-outperformed-DIY. Same Q3 IEEPA give-back. | | TTI (Milwaukee / 0669.HK) | Pro tools | Record portable-power quarter; PACKOUT “largest national loyalty brand for Pros” | Better. Share print, not a category boom. | | SWK (DeWalt) | Battery-platform competitor | Same portable-power record | Worse. Share donor inside the orange box. | | USG / Knauf; RUCO | Gypsum / joint compound | Exclusive ultralight gypsum launch; RUCO lineup expansion | Better for those brands; worse for independent gypsum dealers. | | QXO / Beacon; ABC Supply; POOL; SITE | SRS vertical competitors | SRS “positive in all verticals” and “taking significant share” | Worse (share). 2H roofing volumes get a lap tailwind from Q4'25 shingle −27% to −29% (OC, CSL) — industry math, not HD unique. | | WSO; FERG | HVAC / plumbing wholesale | Mingledorff’s + store infill + purchase card | Worse. HD is building a vertically integrated Pro HVAC/plumbing offer. | | BLDR | Production-builder distributor | SRS+GMS “national production homebuilders” | Slightly worse on wallet-share. Not a starts upgrade. | | DHI / LEN / PHM / NVR | Production builders | Named as customers, not as a demand boom; “frozen housing” | Do not read as better for builder earnings. | | SHW / MAS / TREX | Paint / fixtures / decking | Paint in the 13 positive departments; decking a Pro-strength category | R&M, not a remodel boom. Slightly better for maintenance gallons / Pro decking. | | WHR | Appliances | Next-day on key SKUs to ~60% of population; “shift towards direct purchases” | Better for HD appliance share; mixed for OEMs (replace/direct, not new-home load-in). | | DOW / LYB / NUE | Resin / metals | Unplanned inflation, HD holding value with IEEPA cash | Worse (price realization). Caps what converters can take in this channel. | | AMZN | Speed comparable | Nationwide 3-hour Express; 65% same/next-day parcel | HD closing the speed gap on fill-in trips. Not a comment on Amazon demand. |

Top 3 for consolidation

1. Do not upgrade the housing complex. McPhail was asked directly whether the 110 bp comps-rate step-up was market or share. Answer: “tremendous pressure on our sector and on anyone connected with housing.” Net sales $47,861 million and comps +1.7% are HD share + GMS + ticket, not existing-home sales or financed remodel coming back.
2. The industrial winner is HD’s Pro stack — TTI, USG/Knauf, RUCO, and HD-owned SRS/GMS/Mingledorff’s — at the expense of independent distributors and DeWalt.
3. IEEPA refunds are a sector-wide timing item. Apply the same haircut to LOW and any other U.S. importer of record that booked IEEPA refunds in calendar Q2. The lasting inflation signal is fuel, energy, resin, metals, and Section 301 replacing Section 101.