Home Depot (NYSE: HD) had a strong second quarter, beating Wall Street’s expectations for both sales and earnings. The company also kept its full-year financial forecast unchanged.
The results are a positive sign for the home improvement retailer, which has been dealing with a tough housing market. High mortgage rates, low home sales and economic uncertainty have caused many customers to delay large home improvement projects.
“We continue to operate in what I call ‘frozen housing market’ conditions,” Chief Financial Officer Richard McPhail told CNBC. He said Home Depot is still gaining market share and improving the way it serves customers.
Stronger-than-expected results
Home Depot reported $47.86 billion in revenue for its fiscal second quarter. That was higher than the $47.27 billion analysts had expected. The company also reported adjusted earnings of $4.92 per share, beating the $4.73 analysts had predicted.
Net income increased to $4.77 billion, or $4.79 per share, compared with $4.55 billion, or $4.58 per share, a year earlier. Revenue increased 5.7% from the same period last year. Another positive sign was Home Depot’s comparable sales, which increased 1.7%. Analysts had expected an increase of only 0.9%. McPhail said this was Home Depot’s best comparable-sales result since the third quarter of fiscal 2022.
Customers are still being careful, though
Although the results were better than expected, Home Depot says customers remain cautious about spending money on large projects. McPhail said customers generally have the money to spend but are worried about inflation, fuel costs and economic uncertainty. Those concerns are making people think twice before starting expensive renovations.
“They’ve told us they have the means to spend; they’re just hesitant,” McPhail said. For example, a customer may still be willing to buy paint, tools, or smaller home improvement items. However, they may delay a much more expensive project, such as remodeling a kitchen or bathroom.
Home Depot has seen customers continue to shop across many different categories. Both professional contractors and do-it-yourself customers remained active during the quarter.
However, the company has not yet seen a major return to large projects.
Housing market remains a challenge
The housing market continues to be one of Home Depot’s biggest challenges.
Higher mortgage rates have made buying a home more expensive. At the same time, fewer people are selling their homes. This has created what Home Depot calls a “frozen” housing market. Normally, people who buy a new home often spend money making improvements or renovations. When fewer homes are being bought and sold, there are fewer opportunities for that type of spending.
Home Depot is trying to make up for some of this weakness by focusing more on professional customers, including contractors and builders. The company believes these customers can provide a more stable source of business, even when the broader economy is uncertain.
Home Depot keeps its 2026 forecast
Even with the strong second-quarter results, Home Depot did not raise its financial forecast for the year. The company still expects total sales to grow between 2.5% and 4.5% in fiscal 2026. It also expects an operating margin between 12.4% and 12.6%.
The decision to keep its forecast unchanged shows that the company remains cautious about the rest of the year. While customers are still spending, Home Depot does not know when they will feel comfortable taking on bigger projects.
CEO takes temporary medical leave
Home Depot is also dealing with a leadership change. Last week, the company announced that CEO Ted Decker would take a temporary medical leave of absence for several months. While Decker is away, Ann-Marie Campbell, Home Depot’s senior executive vice president of U.S. stores and operations, will oversee the company’s day-to-day operations.
Despite the leadership change and challenges in the housing market, Home Depot says it plans to keep investing in its business. “We’re focused on controlling what we can control,” McPhail said. The company believes that continued investment in its stores, employees and customer service will help it gain market share now and prepare for stronger demand in the future.
For now, Home Depot’s latest results show that customers are still willing to spend on their homes, even if they are being careful about larger purchases. The company’s strong sales and earnings suggest its strategy is working, but a bigger recovery in home improvement spending may depend on the housing market and consumer confidence improving.
