Financial Trends -- 4/10
Home Depot is in a prolonged revenue and earnings deceleration cycle stretching into its third year
of negative comp transactions and declining EPS. FY2025 delivered a barely positive +0.3% comp (first
positive since FY2022), but GAAP EPS fell -4.6% YoY to $14.23 -- the third consecutive year of EPS
decline from the FY2022 peak. Operating margins contracted 80bp YoY (GAAP). The SRS/GMS acquisitions
are adding revenue but diluting margins and masking weak organic trends. FY2026 guidance of flat-to-2%
comp and flat-to-4% EPS growth is uninspiring and dependent on a housing recovery that management
explicitly says has not begun.
Weight: 25%
FY2025 Net Sales
$164.7B
+3.2% YoY | Organic ~flat, acquisitions ~80% of growth
FY2025 GAAP Diluted EPS
$14.23
-4.6% YoY | 3rd consecutive year of decline
FY2025 GAAP Op Margin
12.7%
-80bp YoY | 150bp decline over 2 years
FY2025 Operating CF
$16.3B
-17.6% YoY | Working capital + inventory headwinds
Revenue Trajectory (Annual, USD B)
Revenue growth decelerating; organic growth essentially zero.
Annual revenue growth slowed from +14.4% (FY2021) to +4.1% to -3.0% to +4.5% to +3.2% (FY2025).
FY2025 revenue of $164.7B was boosted by ~$6.8B from the SRS/GMS acquisitions -- organic growth
was approximately flat. Comp sales of +0.3% were the first positive comp year since FY2022 but
barely above zero. FY2026 guidance calls for flat-to-2% comps and $170B+ in revenue. Consensus
expects ~$170B (FY2026E) and ~$176B (FY2027E).
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| Net Sales ($B) | $132.10B | $151.20B | $157.40B | $152.70B | $159.50B | $164.70B |
| YoY Growth | — | 14.4% | 4.1% | -3.0% | 4.5% | 3.2% |
| Comp Sales | 19.7% | 11.4% | 3.1% | -3.2% | -1.8% | 0.3% |
| US Comp Sales | — | 10.7% | 2.9% | -3.5% | -1.8% | 0.5% |
FY2026E ~$170B, FY2027E ~$176B consensus. FYE late January. Data sourced from Daloopa and HD earnings transcripts.
Quarterly Comp Sales Trajectory (%)
Comps stabilizing near zero -- not accelerating.
After 8 consecutive quarters of negative comps (Q4 FY2022 through Q3 FY2024), comps turned slightly
positive in Q4 FY2024 (+0.8%) and have remained in the flat-to-+1% range since. This is stabilization,
not acceleration. The improvement from deeply negative to barely positive is encouraging directionally
but the magnitude is anemic. FY2026 guidance: flat to +2%.
Comp sales by quarter across fiscal years. Data sourced from Daloopa and HD earnings transcripts.
Comp Transaction vs. Ticket Decomposition (Quarterly)
Transactions still negative -- comp growth driven entirely by ticket inflation.
Comp transactions remain negative, worsening back to -1.6% in Q3-Q4 FY2025 after improving to near-flat
in mid-FY2024. Comp sales growth is being driven entirely by average ticket inflation (+2.4% in Q4), not
volume. Big-ticket comps turned positive in Q4 FY2024 but management stated on Q4 FY2025 call: "We still
have not seen the increase in big ticket. That will be a telltale for a turn in the market."
| Metric | Q1 24 | Q2 24 | Q3 24 | Q4 24 | Q1 25 | Q2 25 | Q3 25 | Q4 25 |
|---|---|---|---|---|---|---|---|---|
| Comp Transactions | -1.5% | -2.2% | -0.6% | 0.6% | -0.5% | -0.4% | -1.6% | -1.6% |
| Comp Avg Ticket | -1.3% | -1.3% | -0.8% | 0.2% | — | 1.4% | 1.8% | 2.4% |
| Big Ticket >$1K | -6.5% | -5.8% | -6.8% | 0.9% | 0.3% | 2.6% | 2.3% | 1.3% |
13+ consecutive quarters of negative comp transactions. Data sourced from Daloopa and HD earnings transcripts.
Margin Trends (Quarterly)
Margins contracting every single quarter YoY -- no relief in sight.
GAAP operating margins declined every quarter in FY2025: Q1 -100bp, Q2 -60bp, Q3 -60bp, Q4 -120bp.
Q4 FY2025 hit 10.1% GAAP op margin, reflecting SRS/GMS margin dilution, operating deleverage, and
53rd-week lapping. FY2025 full-year GAAP op margin was 12.7% vs 13.5% prior year. FY2026 guidance of
12.4%-12.6% implies further contraction. Acquisitions are responsible for ~40bp annual gross margin
dilution, with an additional ~24bp from GMS annualization in FY2026.
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| Gross Margin | 34.0% | 33.6% | 33.5% | 33.4% | 33.4% | 33.3% |
| GAAP Op Margin | — | — | — | 14.2% | 13.5% | 12.7% |
| Adj Op Margin | — | — | — | 14.3% | 13.8% | 13.1% |
FY2026 guided 12.4%-12.6% GAAP op margin. SRS/GMS diluting ~40bp gross margin annually. Data sourced from Daloopa.
Diluted EPS Trajectory (Quarterly)
EPS declining for third consecutive year -- peak-to-trough decline of 15%.
GAAP diluted EPS has fallen from $16.69 (FY2022) to $14.23 (FY2025), a cumulative -14.7% decline.
Q4 FY2025 was particularly weak at $2.58 (-14.6% YoY), partly due to 53rd-week lapping. Adjusted
EPS of $14.69 also declined -3.6% YoY. Management guides Q1 FY2026 EPS to be "mid-single-digit
percentage negative YoY" before improving through the year. FY2026 guidance implies best case ~$14.80,
which would still be below FY2023.
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| GAAP Diluted EPS | $11.94 | $15.53 | $16.69 | $15.11 | $14.91 | $14.23 |
| YoY Growth | — | 30.1% | 7.5% | -9.5% | -1.3% | -4.6% |
| Adj Diluted EPS | — | — | — | $15.25 | $15.24 | $14.69 |
FY2026E consensus ~$14.60, FY2027E ~$15.50. FY2026 guidance: flat-to-4% EPS growth. Data sourced from Daloopa.
Operating Cash Flow (Annual, USD B)
OCF declined sharply -17.6% YoY to $16.3B.
Operating cash flow dropped from $19.8B (FY2024) to $16.3B (FY2025), reflecting lower earnings,
higher working capital needs from GMS integration, and increased inventory (+$2.4B YoY). This
follows the broader pattern of deteriorating cash generation alongside declining earnings and
margin compression.
OCF peaked at $21.2B in FY2023. FY2025 inventory increased $2.4B YoY. Data sourced from Daloopa.
Customer Transactions and Average Ticket (Annual)
Transaction count has not recovered -- still below FY2021 levels.
Customer transactions peaked at 1,760M in FY2021 and have fallen to 1,602M in FY2025 -- a decline
of 158M transactions (-9.0%). Average ticket has increased from $83.04 to $90.56 (+9.1%) over the
same period, partially offsetting the transaction decline. The sustained transaction weakness across
13+ consecutive quarters of negative comp transactions signals that customer demand has genuinely
contracted and has not recovered.
| Metric | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|
| Customer Txns (M) | 1,756M | 1,760M | 1,666M | 1,622M | 1,637M | 1,602M |
| Comp Transactions | 8.6% | -0.1% | -5.4% | -2.9% | -1.0% | -1.0% |
| Avg Ticket ($) | $74.32 | $83.04 | $90.36 | $90.07 | $89.31 | $90.56 |
| Comp Avg Ticket | 10.5% | 11.7% | 8.8% | -0.3% | -0.9% | 1.4% |
Comp transactions negative 13+ consecutive quarters. Data sourced from Daloopa and HD earnings transcripts.
SRS/GMS Acquisition Impact
| Metric | Detail |
|---|---|
| SRS Close Date | June 2024 |
| GMS Close Date | Late FY2025 |
| Combined Revenue Contribution | ~$6.8B (estimated, ~80% of FY2025 revenue growth) |
| GMS Incremental Revenue | ~$1.1B (partial-year) |
| Gross Margin Dilution (Annual) | ~40bp from acquisitions; +24bp from GMS annualization in FY2026 |
| SRS Organic Growth (FY2025) | Low single-digit (despite 28% industry volume decline in roofing) |
| FY2026 SRS Guidance | Mid-single-digit organic growth; 40-50 new locations |
| Pricing Strategy | SRS "more aggressive on pricing in Q4 to maintain share" |
SRS/GMS acquisition details from HD Q3-Q4 FY2025 earnings transcripts. Data sourced from Daloopa.
Acceleration / Deceleration Analysis
| Signal | Detail | Direction |
|---|---|---|
| Revenue Growth | FY2024 +4.5% to FY2025 +3.2%; organic growth ~flat; acquisition-driven | Decelerating |
| Comp Sales | Improved from -1.8% (FY2024) to +0.3% (FY2025); positive inflection but barely above zero | Stabilizing |
| GAAP EPS | $16.69 to $15.11 to $14.91 to $14.23; declining 3 consecutive years | Declining |
| Operating Margin | 14.2% to 13.5% to 12.7% GAAP; FY2026 guide 12.4-12.6% = further compression | Compressing |
| Comp Transactions | Still negative after 13+ quarters; worsened to -1.6% in Q3-Q4 FY2025 | Still Declining |
| Operating Cash Flow | $21.2B to $19.8B to $16.3B; down sharply -17.6% YoY | Declining |
| Pro Ecosystem | Pro posted positive comps, outperformed DIY in Q4; digital +11% | Gaining Traction |
| Big-Ticket Comps | Turned positive Q4 FY2024; positive 5 consecutive quarters though modest | Recovering |
Key Transcript Signals (Q3-Q4 FY2025)
| Theme | Management Commentary |
|---|---|
| Housing Recovery | "We anticipate these pressures will persist as we have not yet seen a catalyst for an inflection in housing activity" -- R. McPhail, Q4 |
| Big-Ticket Projects | "We still have not seen the increase in big ticket. That will be a telltale for a turn in the market" -- T. Decker, Q4 |
| Consumer Uncertainty | "#1 reason our customers are telling us they are not investing in large projects" -- T. Decker, Q4 |
| Pro vs DIY | Pro posted positive comps and outperformed DIY in Q4; Pro ecosystem investments showing traction |
| Tariff Exposure | "More than 50% of products sourced domestically"; mid-single-digit tariff exposure, ~3% SKU price impact; "mostly done with tariff-related pricing actions" -- B. Bastek, Q4 |
| SRS Pricing | SRS invested in price to maintain share amid 28% industry volume decline in roofing; will persist into Q1 FY2026 |
| FY2026 Shape | H2 comps expected above H1; Q1 EPS mid-single-digit negative YoY; gross margin down ~50bp in H1, flat in H2 |
Management commentary from HD Q3 and Q4 FY2025 earnings calls.
Score Derivation
| Factor | Assessment | Impact |
|---|---|---|
| Base Score | Revenue flat-to-low-single-digit organic growth; barely positive comps | 5.0 |
| EPS declining 3 consecutive years | Peak-to-trough EPS decline of ~15% ($16.69 to $14.23) | -1.5 |
| Op margin contracting every quarter | 150bp decline over 2 years; FY2026 guide implies further compression | -1.0 |
| Transaction counts still negative | 13+ quarters of negative comp transactions; demand has not recovered | -0.5 |
| OCF deterioration | Cash generation weakening materially, -17.6% YoY | -0.5 |
| Acquisition masking organic weakness | ~80% of FY2025 revenue growth from acquisitions | -0.5 |
| Comp inflection positive | First positive comp year since FY2022; directional improvement | +0.5 |
| Pro/digital momentum | Pro outperforming, digital +11%, share gains in Pro ecosystem | +0.5 |
| Big-ticket turning positive | Positive for 5 consecutive quarters, early sign of recovery | +0.5 |
| Tariffs manageable | 50%+ domestic sourcing; limited exposure, mostly priced through | +0.5 |
| Net Adjustment | -1.5 - 1.0 - 0.5 - 0.5 - 0.5 + 0.5 + 0.5 + 0.5 + 0.5 = -1.0 | -1.0 |
| Final Score | Base 5.0 minus 1.0 net adjustment | 4/10 |
Data sourced from Daloopa and Home Depot earnings transcripts (Q3 FY2025, Q4 FY2025).