Q3 2025 Earnings Summary
- Home Depot is gaining market share in key categories such as seasonal products, paint, and building materials, demonstrating resilience despite macroeconomic uncertainties.
- The Pro segment is outpacing DIY customers, with strong performance from Pros engaging with the Pro ecosystem and dedicated salespersons, indicating successful initiatives to capture higher-value customers.
- The acquisition of SRS is significantly boosting revenue, with $2.9 billion contributed in the third quarter and on track for $6.4 billion in sales over approximately seven months, and early cross-selling opportunities are showing positive results.
- Gross margins are under pressure due to the acquisition of SRS, which impacted gross margin by 80 basis points in the quarter and is expected to have a 70 basis point annualized impact, potentially affecting profitability.
- Shrink remains a significant challenge, with the operating environment getting harder, indicating ongoing pressures on profitability despite investments to combat theft and loss.
- Weakness in big-ticket transactions, with transactions over $1,000 down 6.8% compared to last year, reflects softer engagement in larger discretionary projects, possibly due to higher interest rates and macroeconomic uncertainty, which could impact future sales growth.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +7% | Improved performance across key categories, partly due to easier comparisons against softer results last year. Additionally, ongoing demand from Pro customers and smaller-ticket projects helped offset the lingering pressure in big-ticket discretionary items and macroeconomic uncertainties. Forward-looking, the company may continue emphasizing smaller project growth to mitigate future macro challenges. |
Building Materials | -9% | Lumber deflation and a pullback in larger renovation projects drove the decline in Building Materials, with lumber prices still below prior-year levels. Higher interest rates and weaker housing turnover also constrained bigger construction undertakings. Looking ahead, focus on pricing strategies and Pro engagement may help stabilize this category if interest rates moderate. |
Hardlines | +8% | Strength in Pro-heavy subcategories (e.g., fasteners, insulation) and increased demand for smaller, DIY-friendly items contributed to growth. Additionally, improved in-store and digital integration supported sales. As customers continue balancing project sizes, Hardlines may remain a bright spot, particularly if macro conditions stabilize and Pro backlogs hold up. |
Products | +7% | Broad-based gains in multiple product lines, supported by innovation launches and seasonal demand for outdoor and home maintenance items. However, softness persists in certain big-ticket categories (like appliances). Longer-term success depends on diversifying merchandising and maintaining strong digital engagement to capture spend across both DIY and Pro segments. |
U.S. Revenue | +7% | Steady recovery in consumer traffic and sequential improvement in monthly comps helped drive top-line growth, reflecting both carryover demand in smaller projects and relative strength in Pro segments. Despite ongoing macroeconomic headwinds and the shift toward services spending, the company’s established store footprint and ongoing focus on value propositions could sustain moderate growth if interest rate pressures ease. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
New Stores | FY 2024 | Approximately 12 new stores | Approximately 12 new stores | no change |
Gross Margin | FY 2024 | 33.5% | 33.5% | no change |
Operating Margin | FY 2024 | 13.5% to 13.6% | 13.5% | no change |
Adjusted Operating Margin | FY 2024 | 13.8% to 13.9% | 13.8% | no change |
Effective Tax Rate | FY 2024 | 24% | 24% | no change |
Net Interest Expense | FY 2024 | $2.2 billion | $2.1 billion | lowered |
Diluted EPS | FY 2024 | Decline -2% to -4% | Decline ~2% | raised |
Adjusted EPS | FY 2024 | Decline -1% to -3% | Decline ~1% | raised |
Total Sales Growth | FY 2024 | 2.5% to 3.5% | 4% | raised |
Comparable Sales | FY 2024 | -3% to -4% | -2.5% | raised |
53rd Week Contribution | FY 2024 | $2.3 billion | $2.3 billion | no change |
SRS Contribution | FY 2024 | $6.4 billion | $6.4 billion | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Total Sales Growth | Q3 2025 | 2.5% – 3.5% | +6.64% YoY (from 37,710In Q3 2024 to 40,217In Q3 2025) | Beat |
Gross Margin | Q3 2025 | ~33.5% | 33.37% ((40,217 − 26,792) / 40,217) | Met |
Operating Margin (GAAP) | Q3 2025 | 13.5% – 13.6% | 13.48% (5,418 / 40,217) | Missed |
Diluted EPS YoY Change | Q3 2025 | Decline of −2% to −4% | −3.66% ((3.67−3.81)/3.81), from 3.81In Q3 2024 to 3.67In Q3 2025 | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Gains in market share | Q2 2025: Gains mostly in paint. Q1 2025: Gains in paint, seasonal, and building materials. Q4 2024: Building materials and paint comps above company average. | Continued share gains in paint, seasonal products, and building materials. | Recurring topic with consistently positive sentiment |
Investments in Pro ecosystem | Q2 2025: Continued Pro outperformance, supply chain investments. Q1 2025: Pro expansion in 17 markets, digital assets, trade credit pilots. Q4 2024: Focus on Pro wallet share, trade credit pilots, acquisitions. | 17 active Pro markets, with Pro ecosystem investments driving share gains and outperformance vs. DIY. | Recurring focus with growing positive impact |
Needs-based projects driving demand | Q2 2025: No explicit mention. Q1 2025: No direct comment. Q4 2024: No direct comment. | Needs-based projects continue, while larger discretionary projects face deferrals. | Newer mention indicating stable demand drivers |
Larger discretionary projects being deferred | Q2 2025: Deferred larger projects from interest rate pressures. Q1 2025: Continued softness in financed remodels. Q4 2024: Softer engagement in big-ticket categories. | Ongoing deferrals due to higher interest rates and macro uncertainty; big-ticket transactions down 6.8% year-over-year. | Consistent negative sentiment across quarters |
Organized retail crime and shrink challenges | Q2 2025: No mention. Q1 2025: Persistent shrink pressures but improving ROI on mitigation investments. Q4 2024: No mention. | Major investments yielding year-over-year improvements in shrink; environment remains challenging. | Intermittent topic with improved yet ongoing concerns |
Weather and hurricane-related impacts on sales | Q2 2025: Extreme heat mentioned, no hurricane impact. Q1 2025: Delayed spring, “hurricane effect” analogy for prior pull-forward. Q4 2024: Weather-driven softness in January, hurricane analogy for demand shifts. | Hurricane sales added ~$200M, boosting comps ~55 bps; favorable weather aided outdoor categories. | Recurring driver; Q3 benefited from storms |
SRS acquisition and integration effects | Q2 2025: $1.3B in sales for ~6 weeks, lowering gross margin by ~35 bps. Q1 2025: Strategic opportunity pending close. Q4 2024: No mention. | Contributed $2.9B in sales, ~80 bps gross margin impact; cross-selling and strategic alignment continuing. | Key acquisition creating margin headwinds but driving sales |
HD Supply performance in a diversified model | Q2 2025: Described as a bright spot with strong sales growth. Q1 2025: No mention. Q4 2024: No mention. | No mention in Q3 2025. | Previously highlighted, not referenced in current period |
Changes in guidance | Q2 2025: Revised downward due to softer demand. Q1 2025: Guidance reaffirmed. Q4 2024: Introduced cautious FY 2024 outlook. | Updated guidance: ~4% total sales growth (including SRS, 53rd week), -2.5% comps, -1% adjusted EPS vs. FY 2023. | Recurring with adjustments reflecting market shifts |
Suspension of share repurchases and increased leverage | Q2 2025: Stated share repurchase pause until deleveraging from SRS financing; 2.6x debt/EBITDA. Q1 2025: Paused buybacks, building cash for SRS. Q4 2024: No mention. | No mention in Q3 2025. | Mention ended after Q2 |
Margin pressure from mix shift due to acquisitions | Q2 2025: Partial offset from mix shift with SRS. Q1 2025: No mention. Q4 2024: No mention. | ~80 bps gross margin impact from SRS mix shift. | Ongoing challenge tied to integration |
Inventory management and supply chain improvements | Q2 2025: Better on-shelf availability, sidekick tools. Q1 2025: Removed $3B in inventory, improved turns. Q4 2024: Lower inventory, higher in-stock rates. | Inventory reservation for Pros, supply chain enhancements, improved turns (4.8x). | Consistently emphasized for efficiency gains |
Housing market fundamentals (home equity, shortage, aging stock) | Q2 2025: Strong equity gains, turnover down 40%. Q1 2025: No direct mention. Q4 2024: Significant equity, housing shortage ~2-6M units, aging housing stock. | Cited $11.5T in home equity, ~3% turnover at 40-year lows suppressing larger projects. | Recurring long-term bullish driver |
Operating expense deleverage from cost inflation | Q2 2025: ~25-30 bps deleverage from lower comp. Q1 2025: +140 bps in SG&A from deleverage. Q4 2024: Primarily sales deleverage as biggest impact. | No mention in Q3 2025. | Not addressed in current period |
Stabilization in transactions and emerging bottom in demand | Q2 2025: No mention. Q1 2025: Signs of transaction stabilization, “hurricane effect” subsiding. Q4 2024: Transactions stabilizing quarter-over-quarter. | No mention in Q3 2025. | Discussed before but absent in current period |
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Gross Margin Outlook
Q: What's affecting gross margins and future trajectory?
A: Gross margin declined due to an 80 basis point impact from the SRS acquisition mix. Excluding SRS, margins were up significantly, aided by benefits from shrink reduction. The annualized impact from SRS is about 70 basis points, shifting our margin base. Long-term, we anticipate flat gross margins, reinvesting supply chain productivity while maintaining sharp value for customers. -
Housing Market and Interest Rates
Q: How are interest rates affecting larger projects and outlook?
A: Higher rates are pressuring larger, debt-financed remodeling projects and existing home sales, which are at a 40-year low turnover rate of about 3%. The uncertainty around rates and macroeconomic conditions delays homeowners starting big projects. Stability in rates, rather than significant drops, might restore housing activity and remodeling demand. -
Market Share Gains
Q: Are you gaining market share in this environment?
A: Although hard to parse out, we believe we're taking share as our sales outperformed deeper negatives seen in home furnishing expenditures. We saw strong performance in seasonal categories, paint, and building materials, indicating share gains. -
Pro Segment Performance
Q: How are the Pro capabilities impacting performance?
A: In the 17 markets with enhanced Pro capabilities, we're seeing low single-digit share gains and outperformance. Investments in inventory, supply chain, delivery, and sales force have led to strong results, with Pro customers engaging more deeply with our ecosystem. -
Shrink Reduction
Q: How significant is the opportunity from shrink reduction?
A: Our efforts are paying off, with multiple quarters of year-over-year benefits from shrink reduction. While the operating environment is getting harder, our investments and initiatives are leading to tangible results. -
SRS Integration
Q: What's the progress on SRS cross-selling and volume?
A: SRS contributed $2.9 billion in Q3 sales, on track for $6.4 billion over roughly seven months. Cross-selling efforts are showing triple-digit comp growth, with their catalog now available to our customers and our products being quoted to their customer base. Early collaboration between sales teams is progressing well. -
Big-Ticket Sales Pressures
Q: What's impacting big-ticket sales and their outlook?
A: Larger, discretionary projects are being deferred due to higher interest rates and macro uncertainties. Needs-based projects continue, but big-ticket sales are pressured until homeowners gain confidence to undertake larger remodeling. -
Impact of Hurricanes and Weather
Q: How did hurricanes and weather affect performance?
A: Hurricane-related sales added about 55 basis points in Q3, mainly in generators, cleanup, and lumber, skewed towards DIY customers. Exceptional weather drove customer engagement, but this benefit is hard to quantify, making us cautious about extrapolating Q3 results. Guidance reflects Q3 outperformance with some Q4 hurricane impact. -
Tariffs and Sourcing
Q: What's your view on potential tariff impacts?
A: Any new tariffs would have an industry-wide impact, but we source the majority of our goods in North America and have experience managing through previous tariff situations. We're focused on diversifying sourcing and confident in our ability to navigate future trade policies. -
Order Management Rollout
Q: What's the timeline for order management system rollout?
A: We plan to roll out the order management system by the end of 2025. Key elements like inventory reservation are already being implemented, offering significant benefits to how pros manage larger projects.