Q2 2026 The Home Depot Inc Earnings Call

Speaker #1: Greetings, and welcome to the Home Depot 2nd Quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Speaker #2: This summer, get organized and save big with The Home Depot's Summer Storage Event. Make the most of your space with innovative storage solutions while saving along the way.

Speaker #1: If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #2: Discover new waterproof totes that help protect everything from camping gear and fishing equipment to pool inflatables and outdoor accessories. Or get organized with fully built-out tool chests designed to keep your tools secure and right where you need them.

Speaker #1: It is now my pleasure to introduce your host, Isabel Jancy. Please go ahead.

Speaker #2: Find the right solutions for the season, and save on a wide selection of storage in-store or online at HomeDepot.com.

Speaker #2: Thank you, Christine. And good morning, everyone. Welcome to Home Depot 2nd Quarter 2026 earnings call. Joining us on our call today are Richard McPhail, Executive Vice President and Chief Financial Officer; Anne Marie Campbell, Senior Executive Vice President; and Billy Bastic, Executive Vice President of Merchandising.

Speaker #6: Greetings, and welcome to The Home Depot Second Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Speaker #6: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #2: Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to 1 question with 1 follow-up.

Speaker #6: It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

Speaker #2: If we are unable to get to your question during the call, please call our investor relations department at 770-384-2387. Before I turn the call over to Richard, let me remind you that today's press release and presentations made by our executives include forward-looking statements under the Federal Securities Law, including as defined in the Private Securities Litigation Reform Act of 1995.

Speaker #7: Thank you, Christine, and good morning, everyone. Welcome to Home Depot's second quarter 2026 earnings call. Joining us on our call today are Richard McPhail, Executive Vice President and Chief Financial Officer; Ann-Marie Campbell, Senior Executive Vice President; and Billy Bastek, Executive Vice President of Merchandising.

Speaker #7: Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to one question with one follow-up.

Speaker #2: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to the factors identified in the release, and in our most recent annual report, Form 10-K, and other filings with the Securities and Exchange Commission.

Speaker #7: If we are unable to get to your question during the call, please call our Investor Relations department at (770) 384-2387. Before I turn the call over to Richard, let me remind you that today's press release and presentations made by our executives include forward-looking statements under federal securities law, including as defined in the Private Securities Litigation Reform Act of 1995.

Speaker #2: Today's presentation will also include certain non-GAAP measures including but not limited to adjusted operating margin, adjusted diluted earnings per share, and return on invested capital.

Speaker #2: For reconciliation of these and other non-GAAP measures to our corresponding GAAP measures, please refer to our earnings press release on our website. Now, let me turn the call over to Richard.

Speaker #7: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and in our most recent annual report, Form 10-K, and other filings with the Securities and Exchange Commission.

Speaker #3: Thank you, Isabel. And good morning, everyone. Before turning to our results, we want to touch on Ted's temporary medical leave of absence, which we announced last week.

Speaker #3: We wish Ted a quick recovery and appreciate the support that has been shown by so many Home Depot partners. We look forward to Ted's return in a few months, and we will share any material developments as appropriate.

Speaker #7: Today's presentation will also include certain non-GAAP measures, including but not limited to adjusted operating margin, adjusted diluted earnings per share, and return on invested capital.

Speaker #7: For reconciliation of these and other non-GAAP measures to our corresponding GAAP measures, please refer to our earnings press release on our website. Now, let me turn the call over to Richard.

Speaker #3: Anne and I are supported by an exceptional leadership team and the dedicated board, and together we are wholly focused on executing our strategy and winning in our market.

Speaker #3: Turning to the quarter, sales for the 2nd quarter were $47.9 billion, an increase of 5.7% from the same period last year. Comp sales increased 1.7% from the same period last year, and comps in the U.S.

Speaker #8: Thank you, Isabel. And good morning, everyone. Before turning to our results, we want to touch on Ted's temporary medical leave of absence, which we announced last week.

Speaker #8: We wish Ted a quick recovery and appreciate the support that has been shown by so many Home Depot partners. We look forward to Ted's return in a few months, and we will share any material developments as appropriate.

Speaker #3: increased 1.3%. Adjusted diluted earnings per share were $4.92 in the 2nd quarter, compared to $4.68 in the 2nd quarter last year. Our 2nd quarter results exceeded our expectations, and our teams did a great job executing throughout a dynamic environment.

Speaker #8: Ann and I are supported by an exceptional leadership team and a dedicated board, and together we are wholly focused on executing our strategy and winning in our market.

Speaker #8: Turning to the quarter, sales for the second quarter were $47.9 billion, an increase of 5.7% from the same period last year. Comp sales increased 1.7% from the same period last year, and comps in the U.S. increased 1.3%.

Speaker #3: Our customers continue to engage in home improvement projects, and throughout the quarter we saw broad-based demand across the business. In the U.S., our Northern and Western divisions posted positive comps, and Mexico and Canada posted positive comps.

Speaker #8: Adjusted diluted earnings per share were $4.92 in the second quarter, compared to $4.68 in the second quarter last year. Our second quarter results exceeded our expectations, and our teams did a great job executing throughout a dynamic environment.

Speaker #3: While consumer uncertainty and housing affordability continue to pressure demand for larger home improvement projects, we remained focused on what we can control: our strategy of driving our core and culture delivering a frictionless interconnected experience and winning the pro.

Speaker #3: With that, I'll turn it over to Anne.

Speaker #8: Our customers continue to engage in home improvement projects, and throughout the quarter, we saw broad-based demand across the business. In the US, our Northern and Western divisions posted positive comps, and Mexico and Canada also posted positive comps.

Speaker #2: Thank you, Richard. And good morning, everyone. Driving our core and culture is at the heart of what we do every day to deliver the best experience for our customers.

Speaker #2: To do this, we continue to invest in our store experience. Our teams are focused on ensuring on-shelf availability remains at record levels, on introducing new and innovative products, and deploying technology across the stores to enhance the customer experience.

Speaker #8: While consumer uncertainty and housing affordability continue to pressure demand for larger home improvement projects, we remain focused on what we can control. Our strategy of driving our core and culture, delivering a frictionless interconnected experience, and winning the Pro.

Speaker #2: This, coupled with all of our investments in our associate experience through technology-enabled tools, makes it easier than ever for associates to serve customers. And we have seen greater associate engagement, better customer satisfaction scores, and stronger sales.

Speaker #8: With that, I'll turn it over to Ann.

Speaker #7: Thank you, Richard, and good morning, everyone. Driving our core and culture is at the heart of what we do every day to deliver the best experience for our customers.

Speaker #7: To do this, we continue to invest in our store experience. Our teams are focused on ensuring on-shelf availability remains at record levels, on introducing new and innovative products, and on deploying technology across the stores to enhance the customer experience.

Speaker #2: A great example of how we're building on the momentum that we're seeing is through the evolution of Magic Apron. In addition to our website, now associates and customers can utilize this application in arrivals to navigate our stores more efficiently, find products within seconds, and ask questions about products and projects to feel more confident in their ability to complete a home improvement project.

Speaker #7: This, coupled with all of our investments in our associate experience through technology-enabled tools, makes it easier than ever for associates to serve customers. We have seen greater associate engagement, better customer satisfaction scores, and stronger sales.

Speaker #2: Customers' feedback has been incredibly positive. In terms of our interconnected experience, we're making progress on a multitude of initiatives including delivery. We know speed of delivery is important to our customers, and today for in-stock parcel products over 65% of our deliveries are same-day or next-day.

Speaker #7: A great example of how we are building on the momentum that we're seeing is through the evolution of Magic Apron. In addition to our website, now associates and customers can utilize this application in aisles to navigate our stores more efficiently, find products within seconds, and ask questions about products and projects to feel more confident in their ability to complete a home improvement project.

Speaker #2: And we're continuing to get faster. In fact, this month we launched express delivery nationwide with delivery on tens of thousands of products in 3 hours or less.

Speaker #7: Customer feedback has been incredibly positive. In terms of our interconnected experience, we're making progress on a multitude of initiatives, including delivery. We know speed of delivery is important to our customers, and today, for in-stock parcel products, over 65% of our deliveries are same-day or next-day.

Speaker #2: In addition, we've evolved our appliance delivery model to better serve direct purchases. We now stock a select assortment of appliances that can reach our customers next-day in certain markets.

Speaker #2: We are seeing a sales lift in these markets and will continue to lean in to broaden these efforts. And we are winning with the pro.

Speaker #7: And we're continuing to get faster. In fact, this month, we launched Express Delivery nationwide, with delivery on tens of thousands of products in three hours or less.

Speaker #2: Pro-positive comps in the quarter, and we saw strong performance across all our pro cohorts. This is being driven by the many investments we have made across our systems, capabilities for pros, product assortment, job lot quantities, delivery, sales teams, and specialized services.

Speaker #7: In addition, we've evolved our appliance delivery model to better serve direct purchases. We now stock a select assortment of appliances that can reach our customers next day in certain markets.

Speaker #2: There's more to do, but it is evident that we're serving our pros better than ever, and this partnership with our customers creates a sticky and lasting relationship.

Speaker #7: We are seeing a sales lift in these markets and will continue to lean in to broaden these efforts. And we are winning with the Pro.

Speaker #2: In closing, I'd like to thank all of our associates for their hard work this quarter. I'm pleased to announce that based on our first-half results, 100% of our stores qualified for success sharing.

Speaker #7: Pro-positive comps in the quarter, and we saw strong performance across all our pro cohorts. This is being driven by the many investments we have made across our systems, capabilities for pros, product assortment, job lot quantities, delivery, sales teams, and specialized services.

Speaker #2: Our profit sharing program for hourly associates. These results were a testament to our investment across the business and our associates' focus on customer service.

Speaker #7: There's more to do, but it is evident that we are serving our Pros better than ever, and this partnership with our customers creates a sticky and lasting relationship.

Speaker #2: With that, I'll turn it over to Billy.

Speaker #3: Thank you, Anne. Good morning, everyone. I want to start by also thanking all of our associates, supplier, and supply chain partners for their ongoing commitment to serving our customers and communities.

Speaker #7: In closing, I'd like to thank all of our associates for their hard work this quarter. I'm pleased to announce that, based on our first half results, 100% of our stores qualified for Success Sharing.

Speaker #3: As you heard from Richard, our performance during the 2nd quarter exceeded our expectations as customers continued to engage in smaller repair and maintenance projects.

Speaker #3: In the 2nd quarter, we saw a broader engagement with 13 of our 16 merchandising departments posting positive comps, including storage, electrical, hardware, power, plumbing, indoor garden, kitchen, paint, bath, outdoor garden, building materials, flooring, and millwork.

Speaker #7: Our profit sharing program for hourly associates. These results were a testament to our investment across the business and our associates' focus on customer service.

Speaker #7: With that, I'll turn it over to Billy.

Speaker #8: Thank you, Ann. Good morning, everyone. I want to start by also thanking all of our associates, suppliers, and supply chain partners for their ongoing commitment to serving our customers and communities.

Speaker #3: During the 2nd quarter, our comp average ticket increased 2.8% and comp transactions decreased 1%. Big ticket comp transactions are those over $1,000 where positive 2.4% compared to the 2nd quarter of last year.

Speaker #8: As you heard from Richard, our performance during the second quarter exceeded our expectations, as customers continue to engage in smaller repair and maintenance projects.

Speaker #3: We were pleased with the performance we saw in portable power and patio; however, larger discretionary projects remain under pressure. During the 2nd quarter, pro-posted positive comps and outperformed DIY.

Speaker #8: In the second quarter, we saw a broader engagement, with 13 of our 16 merchandising departments posting positive comps, including storage, electrical, hardware, power, plumbing, indoor garden, kitchen, paint, bath, outdoor garden, building materials, flooring, and millwork.

Speaker #3: We saw strength in DIY across many spring-related categories, including live goods, mulch, soils, hardscapes, storage, patio, and grills. And for pro, we saw strength across many pro-heavy categories like portable power, decking, dimensional lumber, pipe and fittings, fastener, hand tools, and concrete.

Speaker #8: During the second quarter, our comp average ticket increased 2.8%, and comp transactions decreased 1%. Big ticket comp transactions—those over $1,000—were positive 2.4% compared to the second quarter of last year.

Speaker #8: We were pleased with the performance we saw in portable power and patio; however, larger discretionary projects remain under pressure. During the second quarter, Pro posted positive comps and outperformed DIY.

Speaker #3: Turning to total company online comp sales, sales leveraging our digital platforms increased 11% compared to the 2nd quarter of last year. This is the 5th quarter in a row with double-digit year-over-year growth driven by our ongoing investments across our interconnected platforms.

Speaker #8: We saw strength in DIY across many spring-related categories, including live goods, mulch, soils, hardscapes, storage, patio, and grills. And for Pro, we saw strength across many Pro-heavy categories like portable power, decking, dimensional lumber, pipe and fittings, fasteners, hand tools, and concrete.

Speaker #3: Delivering the best interconnected experience is a key component of our strategy. And our faster delivery speeds are resonating with customers and driving greater engagement.

Speaker #3: As Anne mentioned, we have made meaningful progress with our delivery speeds. This progress extends beyond parcel products. For big and bulky products, we've also increased speed of delivery significantly.

Speaker #8: Turning to total company online comp sales, sales leveraging our digital platforms increased 11% compared to the second quarter of last year. This is the fifth quarter in a row with double-digit year-over-year growth, driven by our ongoing investments across our interconnected platforms.

Speaker #3: To put this in perspective, over the last 18 months we've reduced our delivery lead times approximately 45% in the US, which is leading to greater conversion with our customers.

Speaker #3: And now, approximately 55% of our big and bulky deliveries on products we stock are delivered within 2 days. Going forward, we will continue to further optimize fulfillment across all of our assets to better serve our customers and enhance the interconnected shopping experience.

Speaker #8: Delivering the best interconnected experience is a key component of our strategy, and our faster delivery speeds are resonating with customers and driving greater engagement.

Speaker #8: As Ann mentioned, we have made meaningful progress with our delivery speeds. This progress extends beyond parcel products. For big and bulky products, we've also increased the speed of delivery significantly.

Speaker #3: During the 2nd quarter, we leaned into products and projects that are resonating with our customers. We focused on innovation, expanded assortments, and reduced friction points.

Speaker #8: To put this in perspective, over the last 18 months, we've reduced our delivery lead times approximately 45% in the U.S., which is leading to greater conversion with our customers.

Speaker #3: All to deliver a compelling value proposition. For example, we continue to see tremendous success in power. In fact, Q2 was a record-setting sales quarter for portable power tools.

Speaker #8: And now, approximately 55% of our big and bulky deliveries on products we stock are delivered within two days. Going forward, we will continue to further optimize fulfillment across all of our assets to better serve our customers and enhance the interconnected shopping experience.

Speaker #3: As we've mentioned before, we have built a strong competitive advantage with our extensive lineup of battery-powered platforms that allows us to continue to grow share in these categories.

Speaker #3: Another category where we continue to see strong performance is storage, as we lean into our branded systems and expanded assortments. Milwaukee Packout, our largest national loyalty brand for pros, has the industry's most versatile and durable modular storage system with solutions for toolboxes, organizers, racks, and many more.

Speaker #8: During the second quarter, we leaned into products and projects that are resonating with our customers. We focused on innovation, expanded assortments, and reduced friction points.

Speaker #8: All to deliver a compelling value proposition. For example, we continue to see tremendous success in power. In fact, Q2 was a record-setting sales quarter for portable power tools.

Speaker #3: These modular units provide our pros with easy access to all their tools at their job site and at their homes. And in appliances, we recognize that in the current environment there is a growing shift towards direct purchases which is why we have been making advancements in our supply chain capabilities to more easily and quickly get product to the customer.

Speaker #8: As we've mentioned before, we have built a strong competitive advantage with our extensive lineup of battery-powered platforms, which allows us to continue to grow share in these categories.

Speaker #8: Another category where we continue to see strong performance is storage, as we lean into our branded systems and expanded assortments. Milwaukee PACKOUT, our largest national loyalty brand for pros, has the industry's most versatile and durable modular storage system, with solutions for toolboxes, organizers, racks, and many more.

Speaker #3: As a result of our investments, we are now able to provide next-day delivery coverage on key SKUs to nearly 60% of the population. We are encouraged with the positive performance we are seeing in these markets and will continue to expand population coverage and SKUs throughout the year.

Speaker #8: These modular units provide our pros with easy access to all their tools at their job site and at their homes. And in appliances, we recognize that in the current environment, there is a growing shift towards direct purchases, which is why we have been making advancements in our supply chain capabilities to more easily and quickly get product to the customer.

Speaker #3: In addition, we are expanding our relationship with USG across our business. The Home Depot will be the exclusive launch partner for USG's newest innovation, ultralight-tough gypsum panels in the big box retail channel.

Speaker #3: Further solidifying our leadership as the go-to retailer for pro-preferred building materials this product stands out as the lightest and most durable half-inch panel in the market.

Speaker #8: As a result of our investments, we are now able to provide next-day delivery coverage on key SKUs to nearly 60% of the population. We are encouraged by the positive performance we are seeing in these markets and will continue to expand population coverage and SKUs throughout the year.

Speaker #3: We're also accelerating growth with another key pro exclusive, Ruko Joint Treatments. Ruko has driven strong pro-loyalty with us for decades, and we are excited to expand their product lineup across our stores.

Speaker #8: In addition, we are expanding our relationship with USG across our business. The Home Depot will be the exclusive launch partner for USG's newest innovation.

Speaker #3: As we look ahead to the 3rd quarter, our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when they need it.

Speaker #8: Ultralight tough gypsum panels in the big box retail channel. Further solidifying our leadership as the go-to retailer for pro-preferred building materials, this product stands out as the lightest and most durable half-inch panel in the market.

Speaker #3: With that, I'd like to turn the call back over to Richard.

Speaker #2: Thanks, Billy. I'll now spend a few minutes on our financial update for the total sales were $47.9 billion, an increase of 2.6 billion, or 5.7% from last year.

Speaker #8: And we're also accelerating growth with another key Pro exclusive—RUCO Joint Treatments. RUCO has driven strong Pro loyalty with us for decades, and we are excited to expand their product lineup across our stores.

Speaker #2: During the 2nd quarter, our total company comps were positive 1.7%, with comps of positive 1.2% in May, positive 1.5% in June, and positive 2.3% in July.

Speaker #8: As we look ahead to the third quarter, our merchandising organization remains focused on being our customers' advocate for value. This means continuing to provide a broad assortment of best-in-class products that are in stock and available for our customers when they need them.

Speaker #8: With that, I'd like to turn the call back over to Richard.

Speaker #2: Comps in the US were positive 1.3% for the quarter, with comps of positive 0.5% in May, positive 1.2% in June, and positive 2.2% in July.

Speaker #5: Thanks, Billy. I'll now spend a few minutes on our financial update for the quarter. In the second quarter, total sales were $47.9 billion, an increase of $2.6 billion.

Speaker #5: Or 5.7% from last year. During the second quarter, our total company comps were positive 1.7%, with comps of positive 1.2% in May, positive 1.5% in June, and positive 2.3% in July.

Speaker #2: In the 2nd quarter, we received IEPA tariff refunds which reduced our cost of goods sold by $685 million. While these refunds were received in the 2nd quarter, they are being used to offset unplanned and rising cost pressures throughout the year.

Speaker #5: Comps in the U.S. were positive 1.3% for the quarter, with comps of positive 0.5% in May, positive 1.2% in June, and positive 2.2% in July.

Speaker #2: In the 2nd quarter, our gross margin was $33.7%, an increase of approximately 25 basis points, from the 2nd quarter of last year, which was primarily driven by the benefit from the IEPA tariff refund, largely offset by incremental cost pressures related to fuel, energy, and other product input costs as well as a change in mix as a result of the GMS acquisition.

Speaker #5: In the second quarter, we received IEPA tariff refunds, which reduced our cost of goods sold by $685 million. While these refunds were received in the second quarter, they are being used to offset unplanned and rising cost pressures throughout the year.

Speaker #2: Our underlying gross margin performance was in line with our expectations. During the 2nd quarter, operating expense as a percent of sales increased approximately 45 basis points, to $19.4%, compared to the 2nd quarter of 2025.

Speaker #5: In the second quarter, our gross margin was 33.7%, an increase of approximately 25 basis points from the second quarter of last year. This was primarily driven by the benefit from the IEPA tariff refund, largely offset by incremental cost pressures related to fuel, energy, and other product input costs, as well as a change in mix as a result of the GMS acquisition.

Speaker #2: Our operating expense performance was in line with our expectations. Our operating margin for the 2nd quarter was 14.3%, compared to 14.5% in the 2nd quarter of 2025, in the quarter pre-tax intangible asset amortization was $178 million.

Speaker #5: Our underlying gross margin performance was in line with our expectations. During the second quarter, operating expense as a percent of sales increased approximately 45 basis points to 19.4%, compared to the second quarter of 2025.

Speaker #2: Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the 2nd quarter was 14.7%, compared to 14.8% in the 2nd quarter of 2025.

Speaker #5: Our operating expense performance was in line with our expectations. Our operating margin for the second quarter was 14.3%, compared to 14.5% in the second quarter of 2025.

Speaker #2: Interest and other expense for the 2nd quarter decreased by 26 million dollars, to $524 million. In the 2nd quarter, our effective tax rate was 24.5%, compared to 24.2% in the 2nd quarter of fiscal 2025.

Speaker #5: In the quarter, pre-tax intangible asset amortization was $178 million. Excluding the intangible asset amortization in the quarter, our adjusted operating margin for the second quarter was 14.7%, compared to 14.8% in the second quarter of 2025.

Speaker #2: Our diluted earnings per share for the 2nd quarter were $4.79, compared to $4.58 in the 2nd quarter of 2025. Excluding intangible asset amortization, our adjusted diluted earnings per share for the 2nd quarter were $4.92, an increase of 5.1%, compared to the 2nd quarter of 2025.

Speaker #5: Interest and other expense for the second quarter decreased by $26 million to $524 million. In the second quarter, our effective tax rate was 24.5%, compared to 24.2% in the second quarter of fiscal 2025.

Speaker #2: During the 2nd quarter, we opened 3 new stores bringing our total store count to 2,364. At the end of the quarter, merchandise inventories were 26.8 billion dollars, up approximately 2 billion dollars compared to the 2nd quarter of 2025, and inventory turns were 4.5 times, down from 4.6 times last year.

Speaker #5: Our diluted earnings per share for the second quarter were $4.79, compared to $4.58 in the second quarter of 2025. Excluding intangible asset amortization, our adjusted diluted earnings per share for the second quarter were $4.92, an increase of 5.1% compared to the second quarter of 2025.

Speaker #2: Turning to capital allocation, during the 2nd quarter, we invested approximately $880 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.3 billion in dividends to our shareholders.

Speaker #5: During the second quarter, we opened three new stores, bringing our total store count to 2,364. At the end of the quarter, merchandise inventories were $26.8 billion, up approximately $2 billion compared to the second quarter of 2025, and inventory turns were 4.5 times, down from 4.6 times last year.

Speaker #2: Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 24.8%, down from 27.2% in the 2nd quarter of fiscal 2025.

Speaker #2: Now I will comment on our outlook for fiscal 2026. Our performance during the 2nd quarter exceeded our expectations. We are encouraged with the underlying demand we see in the business, and we are reaffirming our fiscal 2026 guidance.

Speaker #5: Turning to capital allocation, during the second quarter we invested approximately $880 million back into our business in the form of capital expenditures. During the quarter, we also paid approximately $2.3 billion in dividends to our shareholders.

Speaker #2: We expect to continue to grow our market share, and for our comp sales to range between flat to 2% growth, with total sales growth of between approximately 2.5% and 4.5%, reflecting the contribution of the GMS acquisition, new stores, new branches, and tuck-in acquisitions.

Speaker #5: Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 24.8%, down from 27.2% in the second quarter of fiscal 2025.

Speaker #5: Now, I will comment on our outlook for fiscal 2026. Our performance during the second quarter exceeded our expectations. We are encouraged by the underlying demand we see in the business, and we are reaffirming our fiscal 2026 guidance.

Speaker #2: For the year, we expect SRS to deliver missing digit percent organic sales growth. We plan to open approximately 15 new stores and 40 to 50 new SRS branches.

Speaker #5: We expect to continue to grow our market share and for our comp sales to range between flat and 2% growth, with total sales growth of approximately 2.5% to 4.5%, reflecting the contribution of the GMS acquisition, new stores, new branches, and tuck-in acquisitions.

Speaker #2: Our gross margin is expected to be approximately 33.1%. Further, we expect operating margin of approximately 12.4 to 12.6%, an adjusted operating margin of approximately 12.8 to 13%.

Speaker #2: Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately 2.3 billion dollars. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase approximately flat to 4%, compared to fiscal 2025.

Speaker #5: For the year, we expect SRS to deliver mid-single-digit percent organic sales growth. We plan to open approximately 15 new stores and 40 to 50 new SRS branches.

Speaker #5: Our gross margin is expected to be approximately 33.1%. Further, we expect operating margin of approximately 12.4% to 12.6%, and adjusted operating margin of approximately 12.8% to 13%.

Speaker #2: We plan to continue investing in our business, with capital expenditures of approximately 2.5% of sales for fiscal 2026. We believe that we will continue to grow market share as a result of our competitive advantages and ongoing investments by delivering the best experience in home improvement.

Speaker #5: Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately $2.3 billion. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase approximately flat to 4% compared to fiscal 2025.

Speaker #2: Thank you for your participation in today's call, and Christine, we are now ready for questions.

Speaker #1: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #5: We plan to continue investing in our business, with capital expenditures of approximately 2.5% of sales for fiscal 2026. We believe that we will continue to grow market share as a result of our competitive advantages and ongoing investments by delivering the best experience in home improvement.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys. One moment, please, while we poll for questions.

Speaker #1: Thank you. Our first question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Speaker #5: Thank you for your participation in today's call. Christine, we are now ready for questions.

Speaker #3: Hey, thanks very much. Good morning. Billy was hoping you could comment on the broadening of the category strength in the quarter. You called out 13 areas.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Speaker #3: I guess double-click on where you're seeing the strongest parts of the business and the outlook in the back half.

Speaker #2: Yeah, thanks, Chuck, for the question. Yeah, as I mentioned in the prepare remarks, we saw 13 categories of our 16 positive comp, and we had if you think about the core of our business, electrical, plumbing, hardware, tools, both in-store and online, we had great performance online.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to lift your hands before pressing the star keys. One moment, please, while we poll for questions.

Speaker #1: Thank you. Our first question comes from the line of Chuck Graham with Gordon Haskett. Please proceed with your question.

Speaker #2: I mentioned the double-digit positive comps. Those businesses were even greater than the online comp. But really, the middle of the store, and to put that in context, if you look at our top 20 businesses across the store that drove a positive performance, only 3 of those 20 were actually in the seasonal business.

Speaker #3: Hey, thanks very much. Good morning. Billy, I was hoping you could comment on the broadening of the category strength in the quarter. I think you called out 13 areas.

Speaker #3: I guess, double-click on where you're seeing the strongest parts of the business and the outlook on the back half.

Speaker #2: So we feel really good about what's happening in the middle of the store and certainly much broader-based impact as we mentioned in the prepared remarks.

Speaker #5: Yeah, thanks, Chuck, for the question. Yeah, as I mentioned in the prepare remarks we saw 13 categories of our 16 positive comp and we had if you think about the core of our business, electrical, plumbing, hardware, tools, both in-store and online, we had great performance online.

Speaker #3: Okay, that's great. And then Richard, just on the tariff refund of 685 million, can you speak to how much of that was for inventory that flowed through the P&L and Q2 versus how much was flowed through the P&L in prior quarters?

Speaker #5: I mentioned the double-digit positive comps. Those businesses were even greater than the online comp. But really, the middle of the store—and to put that in context, if you look at our top 20 businesses across the store that drove positive performance, only three of those 20 were actually in the seasonal business.

Speaker #3: And I guess, are you expecting any more refunds to help you in the back half of the year? And then when we the lap of that 685 million, how should we think about that in terms of the gross margin impact?

Speaker #5: So, we feel really good about what's happening in the middle of the store, and certainly a much broader-based impact, as we mentioned in the prepared remarks.

Speaker #2: Yeah, great. Thank you for the question. So let me just let me give you some numbers to clarify the tariff refunds, and then we'll talk about how this works through the year.

Speaker #2: So and then into next year. So we received 730 million dollars in tariff refunds during the quarter. We received all those right around the end of the month of June.

Speaker #3: Okay, that's great. And then, Richard, just on the tariff refund of $695 million, can you speak to how much of that was for inventory that flowed through the P&L in Q2 versus how much had flowed through the P&L in prior quarters?

Speaker #2: And those refunds represent the vast majority of what we would expect to receive for those IEPA refunds that we filed for. There's an immaterial amount that we expect we may receive in the back half.

Speaker #3: And I guess, are you expecting any more refunds to help you in the back half of the year? And then when we think about next year and the lap of that $685 million, how should we think about that in terms of the gross margin impact?

Speaker #5: Yes, great, thank you for the question. So, let me just give you some numbers to clarify the tariff refunds, and then we'll talk about how this works through the year.

Speaker #2: Of that 730 million, 685 million reduced our cost of goods sold as they applied to products that had already been sold. The remaining 45 million remains in inventory, and we'll hit the P&L as we turn inventory through the remainder of the year.

Speaker #5: So, and then into next year. So, we received $730 million in tariff refunds during the quarter. We received all those right around the end of the month of June.

Speaker #5: And those refunds represent the vast majority of what we would expect to receive for those IEPA refunds that we filed for. There's an immaterial amount that we expect we may receive in the back half.

Speaker #2: And so let's just talk about the shape of the year, how this impacts the shape of the year, because your question is lapping into next year.

Speaker #2: So thinking about how they impacted the quarter, 685 million dollar reduction in COGS was about a 145 basis point gross impact to margin. As we said in our prepared remarks, those benefits offset increased costs that we've seen in our cost base of about 60 basis points.

Speaker #5: Of that $730 million, $685 million reduced our cost of goods sold as they applied to products that had already been sold. The remaining $45 million remains in inventory and will hit the P&L as we turn inventory through the remainder of the year.

Speaker #2: So you can think about the net benefit of refunds in our P&L being around 85 basis points. And just to tie out the numbers, on gross margin real quickly, we also had the mix impact of the GMS and Mingledorf acquisitions have an impact of about benefit of tariff of 85 basis points mix impact of 60.

Speaker #5: So let's just talk about the shape of the year and how this impacts the shape of the year, because your question is lapping into next year.

Speaker #5: So, thinking about how they impacted the quarter, the $685 million reduction in COGS was about a 145 basis point gross impact to margin.

Speaker #2: So that gives you the year-over-year increase of about 25 basis points. So just talking about the nature of refunds, while we received those refunds in the second quarter, we've also experienced unplanned pressure from fuel energy and other product input costs that we expect will fully offset the benefit from tariff refunds over the year.

Speaker #5: As we said in our prepared remarks, those benefits offset increased costs that we've seen in our cost base by about 60 basis points. So, you can think about the net benefit of refunds in our P&L being around 85 basis points.

Speaker #5: And just to tie out the numbers on gross margin real quickly, we also had the mix impact of the GMS and Mingledorf acquisitions have an impact of about 60 basis points.

Speaker #2: And so if you think about the shape of the P&L, while those refunds are going to go to offset costs in, call it, Q3 sorry, Q2 and Q3, because we book all of the refunds when we receive the cash, you are going to see a little bit of a P&L shift between Q and Q2 and Q3.

Speaker #5: So, net benefit of tariff of 85 basis points, mix impact of 60. So that gives you the year-over-year increase of about 25 basis points.

Speaker #5: So just talking about the nature of refunds, while we received those refunds in the second quarter, we've also experienced unplanned pressure from fuel, energy, and other product input costs that we expect will fully offset the benefit from tariff refunds over the year.

Speaker #2: And Billy, maybe just talk about the environment we're in and how we've looked at tariffs.

Speaker #4: Yeah, I mean, you mentioned Richard some of the inputs, the incremental inputs to what we planned coming into the year. Certainly, we've seen incremental cost pressure related to fuel, energy, other product inputs.

Speaker #5: And so, if you think about the shape of the P&L, while those refunds are going to go to offset costs in, call it, Q2 and Q3, because we book all of the refunds when we receive the cash, you are going to see a little bit of a P&L shift between Q2 and Q3.

Speaker #4: You can think of commodities with resin, and metals, so we didn't have that in our plan as we came into the year. So those are incremental.

Speaker #4: And then the other piece I would mention that maybe gets overlooked is there's been some changes in tariffs incrementally relative to our planning process coming into the year.

Speaker #4: Section 101 expired in July. It was updated in February, expired in July, and replaced with the Section 301 piece. So those were actually also incremental to what we had forecasted coming into the year.

Speaker #5: And Billy, maybe just talk about the environment we're in and how we've looked at tariffs. Yeah, I mean, you mentioned, Richard, some of the incremental inputs to what we planned coming into the year.

Speaker #5: Certainly, we've seen incremental cost pressure related to fuel, energy, and other product inputs. You can think of commodities like resin and metals. We didn't have that in our plan as we came into the year.

Speaker #4: So we're doing a great job of offsetting that. The merchant's doing a great job with our supply chain teams, but those are incremental pressures that we did not have as part of our outlook for 2026.

Speaker #2: And so, Chuck, just to get back to your question, because we expect the tariff refunds to be fully offset by the incremental cost pressure that Billy called out, we've reaffirmed our guidance for the year.

Speaker #5: So those are incremental. And then the other piece I would mention, that maybe gets overlooked, is there have been some changes in tariffs incrementally relative to our planning process coming into the year.

Speaker #5: Section 101 expired in July. It was updated in February, and expired in July, and replaced with the Section 301 piece. So those were actually also incremental to what we had forecasted coming into the year.

Speaker #2: And so while you might see some timing some lapping next year on a quarterly basis that we'll need to take you through, there shouldn't be a lap from an annual perspective when we head into 2027.

Speaker #5: So, we're doing a great job of offsetting that. The merchants are doing a great job with our supply chain teams. But those are incremental pressures that we did not have as part of our outlook for 2026.

Speaker #3: Yeah, it makes a lot of sense. Thank you both and our best to Ted and his recovery. Thanks.

Speaker #5: And so, Chuck, just to get back to your question, because we expect the tariff refunds to be fully offset by the incremental cost pressure that Billy called out, we've reaffirmed our guidance for the year.

Speaker #2: Thank you.

Speaker #1: Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question.

Speaker #5: Good morning, guys. Two questions. First, just one more clarification on the comments on the cost pressures. Are we to assume an incremental 60 basis points of pressure in Q3 and Q4, at least relative to initial plan?

Speaker #5: And so while you might see some timing some lapping next year on a quarterly basis that we'll need to we'll need to take you through, there shouldn't be a lap from an annual perspective when we head into 2027.

Speaker #5: And then second, while higher rates, which obviously we're seeing in the markets right now, certainly don't help, based on your internal models, do higher rates actually hurt here, or do you think most of the damages already been done?

Speaker #5: Thanks.

Speaker #3: Yeah, it makes a lot of sense. Thank you both, and our best to Ted and his recovery. Thanks.

Speaker #2: Sure. Thank you, Scott. I think you should think about this in the way we're thinking about it as tariff refunds are going to offset cost in really a period sort of over Q2 and Q3.

Speaker #5: Thank you.

Speaker #2: Our next question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question.

Speaker #6: Good morning, guys. Two questions. First, just one more clarification on the comments on the cost pressures. Are we to assume an incremental 60 basis points of pressure in Q3 and Q4, at least relative to the initial plan?

Speaker #2: And I think what we would expect to see is that our gross margin rate in the fourth quarter will likely be right around flat compared to last year.

Speaker #2: So this is sort of a Q2 and Q3 dynamic which obviously just has a little complication of the timing of the receipt of the refunds.

Speaker #6: And then second, while higher rates—which obviously we're seeing in the markets right now—certainly don't help, based on your internal models, do higher rates actually hurt here, or do you think most of the damage has already been done?

Speaker #6: Thanks.

Speaker #2: With respect to rates, I think as we've said, over the past few years, housing turnover just is one kind of one point in the economy that we watch.

Speaker #5: Sure, thank you, Scott. I think you should think about this in the way we're thinking about it, as tariff refunds are going to offset costs really over a period spanning Q2 and Q3.

Speaker #2: Has been at historical lows it has never been lower as a percentage of the housing stock. And every time we've seen it hit the sort of 3% of the housing stock changing hands, over history, it's always bounced up relatively quickly.

Speaker #5: And I think what we would expect to see is that our gross margin rate in the fourth quarter will likely be right around flat compared to last year.

Speaker #5: So, this is sort of a Q2 and Q3 dynamic, which obviously just has a little complication due to the timing of the receipt of the refunds.

Speaker #2: We've seen housing turnover at these low levels for four years now. So I don't think that we've seen much volatility from the recent increase in rates.

Speaker #5: With respect to rates, I think, as we've said over the past few years, housing turnover is just one point in the economy that we watch.

Speaker #2: We do know that when we see step-downs, we begin to see a little bit of life come into housing. But there's just no sign of an inflection point at this moment.

Speaker #5: It has been at historical lows—it has never been lower as a percentage of the housing stock. Every time we've seen it hit the sort of 3% of the housing stock changing hands, over history, it's always bounced up relatively quickly.

Speaker #5: Understood. Thanks, guys.

Speaker #2: Thank you.

Speaker #1: Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.

Speaker #6: Great. Good morning, everyone. And wishing Ted a quick recovery from our side, too. I wanted to ask about the gap between total comps and Home Depot US comps.

Speaker #5: We've seen housing turnover at these low levels for four years now, so I don't think that we've seen much volatility from the recent increase in rates.

Speaker #6: Looks like it was the widest gap in a couple of years. Can you talk a little bit more about that? And perhaps separating SRS, what's happening there, is that business back to positive in terms of comps?

Speaker #5: We do know that when we see step-downs, we begin to see a little bit of life come into housing. But there's just no sign of an inflection point at this moment.

Speaker #6: And then also just the international performance. Thanks so much.

Speaker #2: Great. Yes. Look, we were really pleased to see so that gap between total company comp and US, first, it reflects FX benefit of about 25 basis points.

Speaker #6: Understood. Thanks, guys.

Speaker #5: Thank you.

Speaker #2: Our next question comes from the line of Seth Sigman with Barclays. Please proceed with your question.

Speaker #2: But we also had fantastic performance internationally and at SRS and maybe let's talk about what we're seeing internationally.

Speaker #7: Great. Good morning, everyone, and wishing Ted a quick recovery from our side, too. I wanted to ask about the gap between total comps and Home Depot U.S. comps.

Speaker #4: Yeah. Now, both Canada and Mexico outcomped the company, which was fantastic. And I know we called out Canada last quarter, but it was great to see the acceleration in Canada.

Speaker #7: It looks like it was the widest gap in a couple of years. Can you talk a little bit more about that? And perhaps, separating SRS, what's happening there? Is that business back to positive in terms of comps?

Speaker #4: And for the half, they just had a fabulous quarter and a half where they positive comp in transactions and positive comp in units, which is fantastic.

Speaker #7: And then also just the international performance. Thanks so much.

Speaker #4: And Mexico has just been on this great run, and they continue to be on a great run. And we are just continuing to see just great results from that team as well.

Speaker #5: Great, yes. Look, we were really pleased to see that gap between total company comp and U.S. First, it reflects FX benefit of about 25 basis points.

Speaker #4: So this was just not a US performance. This was across the company. So really proud of the entire team, not only in the US, but Canada as well.

Speaker #5: But we also had fantastic performance internationally and at SRS, and maybe let's talk about what we're seeing internationally.

Speaker #4: And Mexico.

Speaker #2: Absolutely. And SRS comped above the company average this quarter. They were positive comp in all verticals. And it looks like they're taking significant shares.

Speaker #8: Yeah. Now, both Canada and Mexico outperformed the company, which was fantastic. And I know we called out Canada last quarter, but it was great to see the acceleration in Canada.

Speaker #2: So we couldn't be more pleased with that acquisition and how we're all working together.

Speaker #8: And for the half, they just had a fabulous quarter and a half, where they had positive comp in transactions and positive comp in units, which is fantastic.

Speaker #6: Okay. Great. Thank you for that. And then as we think about the comp guidance for the full year, I think it implies a pretty wide range of scenarios for the back half.

Speaker #8: And Mexico has just been on this great run, and they continue to be on a great run. We are just continuing to see great results from that team as well.

Speaker #6: The midpoint looks like it would be similar to the first half, but below the Q2 trend, despite easier comparisons. So I guess, how are you thinking about the scenarios and anything else?

Speaker #8: So this was not just a US performance; this was across the company. I'm really proud of the entire team, not only in the US but in Canada as well.

Speaker #8: And Mexico.

Speaker #6: Any other building blocks to think about the comps for second half of the year? Thanks.

Speaker #5: Absolutely. And SRS comped above the company average this quarter. They were positive comp in all verticals, and it looks like they're taking significant share.

Speaker #2: Sure. Well, look, we are really encouraged by the performance by our teams. This quarter, and exceeded our expectations for the quarter. We have had a start to Q3 that's really consistent with the demand we saw in the second quarter.

Speaker #5: So we couldn't be more pleased with that acquisition and how we're all working together.

Speaker #7: Okay, great. Thank you for that. And then, as we think about the comp guidance for the full year, I think it implies a pretty wide range of scenarios for the back half.

Speaker #2: But we know what the environment is out there. We have a lot of volatility. As Billy said, we've got unplanned cost pressure that's significant in the market.

Speaker #7: The midpoint looks like it would be similar to the first half, but below the Q2 trend, despite easier comparisons. So, I guess, how are you thinking about the scenarios, and is there anything else?

Speaker #2: And we have frozen housing conditions. And so with all of that, we're focused on controlling what we can control. We do think that the range remains appropriate.

Speaker #7: Any other building blocks to think about the comps for second half of the year? Thanks.

Speaker #5: Sure. Well, look, we are really encouraged by the performance of our teams this quarter. And we exceeded our expectations for the quarter. We have had a start to Q3 that's really consistent with the demand we saw in the second quarter.

Speaker #2: We think that, obviously, the further we go into the year, the extremes of the range become less likely. But we're just we're focused on controlling what we can control.

Speaker #5: But we know what the environment is out there. We have a lot of volatility. As Billy said, we've got unplanned cost pressure that's significant in the market.

Speaker #6: Got it. All right. Thank you, guys.

Speaker #2: Thank you.

Speaker #1: Our next question comes from a line of Michael Lasser with UBS. Please proceed with your question.

Speaker #7: Good morning. Thank you so much for taking my question. We're all trying to figure out how much of the Home Depot's performance in the second quarter was a reflection of the actions that the company is taking and idiosyncratic to the Home Depot versus re-engagement from the consumer in home improvement.

Speaker #5: And we have frozen housing conditions. So, with all of that, we're focused on controlling what we can control. We do think that the range remains appropriate.

Speaker #5: We think that, obviously, the further we go into the year, the extremes of the range become less likely. But we're focused on controlling what we can control.

Speaker #7: And so with that being said, if you could slice and dice it maybe to simplistic ways, one, is your comp accelerated from the first to the second quarter by 110 basis points?

Speaker #7: Got it. All right. Thank you, guys.

Speaker #7: Again, simplistically, how much of that do you think was accelerated market share gains versus the home improvement market accelerating a touch from the first to the second quarter?

Speaker #5: Thank you.

Speaker #2: Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Speaker #4: Good morning. Thank you so much for taking my question. We're all trying to figure out how much of Home Depot's performance in the second quarter was a reflection of the actions that the company is taking and idiosyncratic to Home Depot, versus re-engagement from the consumer in home improvement.

Speaker #7: And second, are you seeing evidence of the consumer re-engaging through things like app downloads? Increased quotes through the bid room? And/or more usage of the Magic Apron that gives you some degree of confidence that the bottom has been reached in home improvement demand and it's going to get better from here?

Speaker #4: And so, with that being said, if you could slice and dice it maybe in simplistic ways: one, your comp accelerated from the first to the second quarter by 110 basis points.

Speaker #7: Thank you.

Speaker #2: Thanks, Michael. So look, Anne and Billy are going to bring this to life. But the headline here for us this quarter is that our teams took share in a difficult environment.

Speaker #4: Again, simplistically, how much of that do you think was accelerated market share gains versus the home improvement market accelerating a touch from the first to the second quarter?

Speaker #2: We're confident the investments that we've made are positioning us like no one else in the market. And when we look out at the broader market, all the data that we see what we hear from other constituents in the market is that there is there remains tremendous pressure on our sector and on anyone connected with housing.

Speaker #4: And second, are you seeing evidence of the consumer re-engaging through things like app downloads, increased quotes through the Bid Room, and/or more usage of the Magic Apron, that gives you some degree of confidence that the bottom has been reached in home improvement demand and it's going to get better from here?

Speaker #2: So when we look at our results, with that overlay, we're confident we're taking share. And it really it all starts in the stores. And so Anne maybe let's just talk about what we're doing.

Speaker #4: Thank you.

Speaker #5: Thanks, Michael. So, look, Ann and Billy are going to bring this to life. But the headline here for us this quarter is that our teams took share in a difficult environment.

Speaker #4: Yeah. No. Thanks. Michael, we're seeing customers respond just so positively to the initiatives we're driving to further empower associates and deliver great customer service.

Speaker #5: We're confident the investments that we've made are positioning us like no one else in the market. And when we look out at the broader market, all the data that we see, what we hear from other constituents in the market, is that there remains tremendous pressure on our sector and on anyone connected with housing.

Speaker #4: And to be honest, it's simple, but it's important. It starts with the right product on the shelves in the. These and specification the customer wants.

Speaker #4: And we've been on this journey to improve our on-shelf availability. And it remains at record levels. And why is that so important for us?

Speaker #5: So when we look at our results, with that overlay, we're confident we're taking share. And it really, it all starts in the stores. And so, Ann, maybe let's just talk about what we're doing.

Speaker #4: This is kind of foundational to driving great customer service. And for me, and for the team, a high level of operational reliability, especially as stores play a more important role in delivery and fulfillment of our interconnected experience.

Speaker #8: Yeah. No, thanks. Michael, we're seeing customers respond just so positively to the initiatives we're driving to further empower associates and deliver great customer service.

Speaker #4: So but when you think about connectivity with our digital assets, it's better and faster fulfillment option. It's about having the best products and brands the customers want.

Speaker #8: And to be honest, it's simple, but it's important. It starts with the right product on the shelves in the quantities and specifications the customer wants.

Speaker #4: So and Billy and team have just been laser focused on driving innovation across the board. And they're continuous efforts. It's just been fantastic. So Billy, innovation wins every day, and your merchants are just fabulous.

Speaker #8: And we have been on this journey to improve our on-shelf availability, and it remains at record levels. And why is that so important for us?

Speaker #2: Well, we appreciate that. No, Michael, it's a good question. We ask ourselves that a lot. We're probably tougher critics on ourselves than anybody, actually.

Speaker #8: Because it's kind of foundational to driving great customer service. And for me, and for the team, a high level of operational reliability, especially as stores play a more important role in delivery and fulfillment of our interconnected experience.

Speaker #2: But there's a number of different factors. I would go back to my prepared remarks. I mean, we are really pleased with our results, and we saw great strength across our entire business.

Speaker #8: So, when you think about connectivity with our digital assets, it's about better and faster fulfillment options. It's about having the best products and brands that customers want.

Speaker #2: And there's certainly there's still a lot of pressure, obviously, on larger projects, discretionary, finance projects. I mean, that's a continued narrative that we're still seeing in the business.

Speaker #8: So, Billy and team have just been laser-focused on driving innovation across the board, and their continuous effort has just been fantastic. So, Billy, innovation wins every day, and your merchants are just fabulous.

Speaker #2: But we just announced express delivery today. Nationwide across all stores that Anne talked about. And a number of different things I mentioned, big and bulky.

Speaker #5: Well, we appreciate that. No, Michael, it's a good question. We ask ourselves that a lot. We're probably tougher critics on ourselves than anybody, actually.

Speaker #2: And a lot of those come from out of our stores. So our store associates are supply chain associates are doing an incredible job. And we're just trying to meet customers where they are.

Speaker #5: But there are a number of different factors. I would go back to my prepared remarks. I mean, we are really pleased with our results, and we saw great strength across our entire business.

Speaker #2: And it all starts in the middle of that store. And so we're really thrilled with the performance and the work that the teams are doing.

Speaker #2: And hats off to the merchant group and all the work they're doing with our vendor partners.

Speaker #5: And there's certainly still a lot of pressure, obviously, on larger projects—discretionary finance projects. I mean, that's a continued narrative that we're still seeing in the business.

Speaker #4: And you called out, Michael, Magic Apron. And Jordan is in the room. And I think enabler when you think about taking friction out of the experience, both for the associate and customer.

Speaker #5: But we just announced express delivery today—nationwide across all stores that Ann talked about—and a number of different things. I mentioned big and bulky.

Speaker #4: So Jordan, the team have just had just fantastic feedback across the board. So you want to kind of lean into just the Magic Apron component?

Speaker #5: And a lot of those come from out of our stores. So our store associates and our supply chain associates are doing an incredible job, and we're just trying to meet customers where they are.

Speaker #2: Yeah. Yeah. Absolutely. I mean, Michael, you referenced online, and to Billy's comments, online grew 11% in the quarter. And we had an increase in traffic and an increase in conversion.

Speaker #5: And it all starts in the middle of that store. And so we're really thrilled with the performance and the work that the teams are doing.

Speaker #2: You referenced the app. The app was our highest growth surface on all of our digital surfaces. And that was exciting. And that's ahead of the planned refresh that we told you we've got coming in the back half, which is great.

Speaker #5: And hats off to the Merchant group and all the work they're doing with our vendor partners.

Speaker #2: And then on Magic Apron, we're getting millions of questions per month now on Magic Apron. That's continued to grow. It's been a great tool for our customers.

Speaker #8: And you called out, Michael, Magic Apron, and Jordan is in the room. And I think that is a really important enabler when we think about taking friction out of the experience, both for the associate and customer.

Speaker #2: We've had great feedback. And Anne's references this morning, we're really to a more localized version of Magic Apron that understands the store context and where you are in the store because the nature of your questions and the nature of the help that we can give you is better if we understand, hey, you're in this store.

Speaker #8: So Jordan, the team have just had just fantastic feedback across the board. So, do you want to kind of lean into just the Magic Apron component?

Speaker #6: Yeah, absolutely. I mean, Michael, you referenced online, and to Billy's comments, online grew 11% in the quarter, and we had an increase in traffic and an increase in conversion.

Speaker #2: Well, let's talk about the inventory that's in this store first. So on. So really excited about the engagement digitally, for sure. Hey, Jordan, while we're on it, we've made a lot of investments and Billy called out express.

Speaker #6: You referenced the app. The app was our highest growth surface on all of our digital surfaces, and that was exciting. And that's ahead of the planned refresh that we told you we've got coming in the back half, which is great.

Speaker #2: Maybe just we had an exciting release this morning.

Speaker #6: And then on Magic Apron, we're getting millions of questions per month now on Magic Apron, and it's continued to grow. It's been a great tool for our customers.

Speaker #3: Yeah. So we did put out a press release this morning on express delivery. And I'd say there, we've been working for the past couple of years on building the fastest fulfillment home improvement.

Speaker #6: We've had great feedback. And as Ann referenced this morning, we're really moving to a more localized version of Magic Apron that understands the store context and where you are in the store, because the nature of your questions, and the nature of the help that we can give you, is better if we understand, hey, you're in this store.

Speaker #3: And that's been a joint effort across merchandising stores, supply chain, technology. We've talked to you about ship from best location as being a technology that we've leveraged to really bring all of the assets together for fast delivery.

Speaker #6: Well, let's talk about the inventory that's in this store first. So on. So, really excited about the engagement digitally, for sure.

Speaker #3: As Billy referenced, we're 65% now, same-day, next-day on parcel that we stock and 55% two-day on big and bulky. And then this morning, what we announced is express.

Speaker #5: Hey, Jordan, while we're on it, we've made a lot of investments, and Billy called out Express. Maybe just—we had an exciting release this morning.

Speaker #3: We've been we've had this in some markets for several months, but we just announced the nationwide rollout this is on HomeDepot.com, a customer can pay a small flat fee and get delivery within three hours.

Speaker #6: Yeah. So we did put out a press release this morning on express delivery, and I'd say there, we've been working for the past couple of years on building the fastest fulfillment in home improvement.

Speaker #3: Now, the majority of those deliveries are actually happening in less than one hour. And so we'll continue to work that promised time down to customers in the months ahead.

Speaker #6: And that's been a joint effort across merchandising, stores, supply chain, and technology. We've talked to you about 'ship from best location' as being a technology that we've leveraged to really bring all of the assets together for fast delivery.

Speaker #3: But super excited about that. You could be a homeowner working in the yard. You need one more bag of seed or one more bag of fertilizer to finish, get a quick delivery.

Speaker #3: You could be a pro on the job site, need some plumbing or other products. And we're really excited about what that does for customers to add on to our broader delivery speed efforts.

Speaker #6: As Billy referenced, we're at 65% now, same-day and next-day on parcel that we stock, and 55% two-day on big and bulky. And then this morning, what we announced is Express.

Speaker #1: Oh, thank you for all that helpful information. My follow-up question is on the growth margin. There's some discussion in the market this morning around, did Home Depot miss the consensus profitability forecast for the second quarter?

Speaker #6: We've had this in some markets for several months, but we just announced the nationwide rollout. This is on HomeDepot.com. A customer can pay a small flat fee and get delivery within three hours.

Speaker #6: Now, the majority of those deliveries are actually happening in less than one hour. And so, we'll continue to work that promised time down for customers in the months ahead.

Speaker #1: If one were to exclude the tariff refund. So with that being said, Richard, if you could walk us through the factors that led to 117 basis points of gross margin pressure, excluding the tariff refund in the second quarter, that would be super helpful and to mentioning what is going to be ongoing versus what is one-time in nature.

Speaker #6: But super excited about that. You could be a homeowner working in the yard—you need one more bag of seed or one more bag of fertilizer to finish, and you can get a quick delivery.

Speaker #6: You could be a pro on the job site, need some plumbing or other products. And we're really excited about what that does for customers to add on to our broader delivery speed efforts.

Speaker #1: Thank you.

Speaker #2: Oh, thank you for all that helpful information. My follow-up question is on the gross margin. There’s some discussion in the market this morning around whether Home Depot missed the consensus profitability forecast for the second quarter, if one were to exclude the tariff refund.

Speaker #2: Sure. Look, Michael, so I first want to talk about our consistent ability to deliver results and maintain stable gross margin. And we'll come back to that.

Speaker #2: But if you look at 2025 let's say 2025 as an example. We had a significantly different cost environment during the year than we expected when we entered 2025.

Speaker #2: So with that being said, Richard, if you could walk us through the factors that led to 117 basis points of gross margin pressure, excluding the tariff refund in the second quarter, that would be super helpful, and also mention what is going to be ongoing versus what is one-time in nature.

Speaker #2: And if you look at our results, we hit our gross margin plan on the button. If you put acquisition, mixed impact aside. And so and I'd say, in fact, the history of Billy and his team over the last five or so years is that we've had unprecedented volatility in our cost environment.

Speaker #2: Thank you.

Speaker #5: Sure. Look, Michael, I first want to talk about our consistent ability to deliver results and maintain stable gross margins. We’ll come back to that.

Speaker #2: And yet we have delivered year after year after year. What tariff refunds allowed us to do was offset increased costs in our environment. And it allowed us to maintain value.

Speaker #5: But if you look at 2025—let's take 2025 as an example—we had a significantly different cost environment during the year than we expected when we entered 2025.

Speaker #2: In the market. If you think about it, tariff refunds are a market-borne benefit. They're not unique to the Home Depot. And so you would expect when you see market-borne benefits or market-borne pressures, we are using those benefits to offset costs.

Speaker #5: And if you look at our results, we hit our gross margin plan right on the button, if you put acquisition, mix impact aside. And so, I'd say, in fact, the history of Billy and his team over the last five or so years is that we've had unprecedented volatility in our cost environment.

Speaker #2: And the market is seeing that in the form of values that have been maintained through the quarter. In the face of a pressured cost environment.

Speaker #5: And yet, we have delivered year after year after year. What tariff refunds allowed us to do was offset increased costs in our environment, and it allowed us to maintain value.

Speaker #2: So just going through the you called out the map. I'll just call it a round 120 sorry, 120 basis point pressure. 60 basis points of that is in the form of increased cost that we were able to offset with tariff refunds.

Speaker #5: In the market, if you think about it, tariff refunds are a market-borne benefit. They're not unique to The Home Depot, and so you would expect when you see market-borne benefits or market-borne pressures, we are using those benefits to offset costs.

Speaker #2: And then the other 60 basis points was simply the mixed impact of GMS and Mingledorf. Recall that we acquired GMS in September of '25.

Speaker #5: And the market is seeing that in the form of...

Speaker #2: And so that's just a lap of the GMS not being on our books in Q2 of last year. So I'm confident, and Billy's confident, had we not had tariff refunds, we would have exceeded our expectations for the quarter regardless.

Speaker #2: It just came in a different form. Billy, anything to add on that?

Speaker #1: Very helpful.

Speaker #3: Exactly right.

Speaker #1: Thank you so much. Good luck.

Speaker #2: Thank you.

Speaker #4: Our next question comes from the line of Kate McShane with Goldman Sachs. Please proceed with your question.

Speaker #5: Hi. Good morning. Thanks for taking our question. We wanted to focus our question on tickets. We know this is one of your stronger comps, but it did appear all ticket-led.

Speaker #5: Can you just speak to the dynamics within Ticket and just how much was from just same SKU inflation that you had may have seen during the quarter?

Speaker #5: And anything else that may have contributed during Q2?

Speaker #2: Yeah. Thanks, Kate, for the question. There was some same SKU AUR, as we've talked about previously, on calls based on some of the cost inputs and so forth.

Speaker #2: We also saw categories as I mentioned, refrigeration, portable power, patio, larger ticket items, think single purchase items, not financed. But think more single purchase items that really help drive that as well.

Speaker #2: We had some intra-category mix with people trading up inside of categories. Then you've got kind of mix, as part of that, just Q2 being the season that it is and selling more riders is one example.

Speaker #2: But really, think of single purchases being the outsized impact, as I mentioned, our comps of over 2,500 dollars.

Billy Bastek: Yeah. There was some same SKU, AUR, as we have talked about previously on calls based on some of the cost inputs and so forth. We also saw categories, as I mentioned, refrigeration, portable power, patio, larger ticket items. You think single purchase items, not financed, but think more single purchase items that really help drive that as well. We had some inter-category mix with people trading up inside of categories. Then you have kind of mix as part of that, just Q2 being the season that it is and selling more riders is one example. But really think of single purchases being the outsized impact, as I mentioned, our comps of over $2,500.

Billy Bastek: Yeah. There was some same SKU, AUR, as we have talked about previously on calls based on some of the cost inputs and so forth. We also saw categories, as I mentioned, refrigeration, portable power, patio, larger ticket items. You think single purchase items, not financed, but think more single purchase items that really help drive that as well. We had some inter-category mix with people trading up inside of categories. Then you have kind of mix as part of that, just Q2 being the season that it is and selling more riders is one example. But really think of single purchases being the outsized impact, as I mentioned, our comps of over $2,500.

Speaker #5: Okay. Thank you. And just our follow-up question to that. I know in an answer to another question, you talked about the extremes of the comp.

Speaker #5: But if that ticket were to hold for the rest of the year, and traffic were to get slightly better, wouldn't we be kind of at the higher end to maybe above the highest end?

Speaker #5: And what would that mean, and what would the scenario be in which we could see that?

Speaker #2: Well, that's certainly yeah, Kate, that's certainly the math of it. As you mentioned, for sure, there's still so much volatility as Richard mentioned that we think we gave the prudent guidance and we'll be back in at the end of Q3 and give a broader view for the end of the year.

But think more about single purchase items that really helped drive that as well. We had some intra-category mix, with people trading up inside of categories. Then you've got, you know, kind of mix as part of that—just, you know, Q2 being the season that it is and selling more riders as one example. But really think of single purchases being the outsized impact. As I mentioned, our comps of over 2,500.

Christopher Horvers: Okay. Thank you. Just a follow-up question to that. I know in an answer to another question, you talked about the extremes of the comp. But if that ticket were to hold for the rest of the year and traffic were to get slightly better, wouldn't we be kind of at the higher end to maybe above the highest end? What would that mean, and what would the scenario be in which we could see that?

[Analyst]: Okay. Thank you. Just a follow-up question to that. I know in an answer to another question, you talked about the extremes of the comp. But if that ticket were to hold for the rest of the year and traffic were to get slightly better, wouldn't we be kind of at the higher end to maybe above the highest end? What would that mean, and what would the scenario be in which we could see that?

Speaker #5: Thank you.

Speaker #4: Our next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Speaker #1: Thanks. And good morning, everybody. So following up on the sort of underlying demand of the business, there are always a lot of weather impacts in the first half of the year.

Speaker #1: How do you look at the monthly performance during Q2, given the softer start where weather probably hurt? But you also accelerated stocks in July.

Okay, thank you. And just a follow-up question to that. I know in an answer to another question, you talked about the extremes of the comp, but if that ticket were to hold for the rest of the year and traffic were to get slightly better, wouldn’t we be kind of at the higher end, to maybe above the highest end? And, you know, what would that mean, and what would the scenario be in which we could see that?

Billy Bastek: Well, that is certainly the math of it, as you mentioned, for sure. There is still so much volatility, as Richard mentioned, that we think we gave the prudent guidance, and we will be back at the end of Q3 and give a broader view for the end of the year.

Billy Bastek: Well, that is certainly the math of it, as you mentioned, for sure. There is still so much volatility, as Richard mentioned, that we think we gave the prudent guidance, and we will be back at the end of Q3 and give a broader view for the end of the year.

Speaker #1: So as we try to tease out the right underlying trend, how do you think about that? And related to that, on the SRS side, I company average in the first half, I think they were up in Q2, down in one Q.

Well that's certainly yeah okay that's certainly the math of it as as as you mentioned for sure. There's there's still so much volatility as Richard mentioned that you know we think we gave The Prudent guidance and and you know we'll be back in at the end of Q3 and and give a give a broad review for the end of the year.

Christopher Horvers: Thank you.

[Analyst]: Thank you.

Speaker #1: So given that mid-single-digit comp expectation, does the gap between the US and the total comp actually widen in the back half of the year, given it looks like SRS becomes more accretive to the total?

Thank you.

Operator: Our next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Operator: Our next question comes from the line of Christopher Horvers with JPMorgan. Please proceed with your question.

Our next question comes from the line of Christopher Hor with JPMorgan. Please proceed with your question.

Christopher Horvers: Thanks, and good morning, everybody. Following up on the underlying demand of the business, there are always a lot of weather impacts in the H1 of the year. How do you look at the monthly performance during Q2, given the softer start where weather probably hurt, but you also accelerated stacks in July? As we try to tease out the right underlying trend, how do you think about that? Related to that, on the SRS side, I think SRS comped below the company average in the H1. I think they were up in Q2, down in Q1. Given that mid-single digit comp expectation, does the gap between the US and the total comp actually widen in the H2 of the year, given it looks like SRS becomes more accretive to the total?

Christopher Horvers: Thanks, and good morning, everybody. Following up on the underlying demand of the business, there are always a lot of weather impacts in the H1 of the year. How do you look at the monthly performance during Q2, given the softer start where weather probably hurt, but you also accelerated stacks in July? As we try to tease out the right underlying trend, how do you think about that? Related to that, on the SRS side, I think SRS comped below the company average in the H1. I think they were up in Q2, down in Q1. Given that mid-single digit comp expectation, does the gap between the US and the total comp actually widen in the H2 of the year, given it looks like SRS becomes more accretive to the total?

Speaker #2: Yeah. Chris, it's Billy. Let me take the first part, and then we'll circle back on the SRS piece. As it relates to the monthly cadence, and and you mentioned some of the weather pieces, there's actually just two really small pieces that drove that.

Speaker #2: In 2025, we typically get one week a year in the country that has significant heat. It's as simple as this. In 2025, that happened at the end of June.

Speaker #2: So that would have been in our period five number. And then in 2026, this past quarter, that happened in the July comp. So that shift in and of itself would have normalized both the June and July comps.

Speaker #2: And then I'll just go one step further as it relates to May. And obviously, you have the spring portion there. That's heavily driven by the north.

Billy Bastek: Yeah, Chris, it's Billy. Let me take the first part, and then we'll circle back on the SRS piece. As it relates to the monthly cadence, and you mentioned some of the weather pieces, there's actually just two really small pieces that drove that. In 2025, we typically get one week a year in the country that has significant heat. It's as simple as this. In 2025, that happened at the end of June, so that would've been in our period 5 number. In 2026, this past quarter, that happened in the July comp. That shift in and of itself would've normalized both the June and July comps. I'll just go one step further as it relates to May, and obviously you have the spring portion there that's heavily driven by the north.

Billy Bastek: Yeah, Chris, it's Billy. Let me take the first part, and then we'll circle back on the SRS piece. As it relates to the monthly cadence, and you mentioned some of the weather pieces, there's actually just two really small pieces that drove that. In 2025, we typically get one week a year in the country that has significant heat. It's as simple as this. In 2025, that happened at the end of June, so that would've been in our period 5 number. In 2026, this past quarter, that happened in the July comp. That shift in and of itself would've normalized both the June and July comps. I'll just go one step further as it relates to May, and obviously you have the spring portion there that's heavily driven by the north.

Thanks and good morning everybody. Uh, so following up on the sort of underlying demand of the of the business, there are always a lot of weather impacts in the first half of the year. How do you look at the monthly performance during 2 Q? Given the softer start where whether probably heard but you also accelerated stacks and in July. So as we try to tease out the right underlying Trend, how do you think about that in related to that on the SRS side? I think as far as comp below the company average, in the first half I think they were they were up in 2, go down in uh, 1 Q. So, you know, give that mid mid, mid single digit, compact expectation. Uh, does the gap between the US and the total comp actually widen in the back half of the Year, given it, it looks like SRS becomes more accretive to the total

Speaker #2: But week 14, which obviously would have been our first week of the quarter, we saw significantly bad weather everywhere across the country. And when you extract just that week out from May, May was literally the exact same comp performance as we had in June and July when you just do the offset for AC.

Yeah, Chris, it's Philly. Let me take the first part and, and then, we'll, we'll, we'll Circle back in the SRS piece. Is it? Relates to the monthly, Cadence, and you, and you mentioned

Some of the weather pieces—there's actually just

Speaker #2: So very consistent across the board. And as I mentioned earlier, only three of our 20 top classes of business were seasonally related for the balance of the quarter as well.

Two really small pieces that, um, drove that in. You know, in 2025, we typically get, you know, one week a year in the country that has significant heat.

Speaker #3: And as far as SRS goes, it's true that they have accelerated through the year. In the back half of 2025, we saw the least amount of storm activity in many years.

Billy Bastek: Week 14, which obviously would've been our first week of the quarter, we saw significantly bad weather everywhere across the country. When you extract just that week out from May was literally the exact same comp performance as we had in June and July when you just do the offset for AC. Very consistent across the board. As I mentioned earlier, only 3 of our 20 top classes of business were seasonally related for the balance of the quarter as well.

Billy Bastek: Week 14, which obviously would've been our first week of the quarter, we saw significantly bad weather everywhere across the country. When you extract just that week out from May was literally the exact same comp performance as we had in June and July when you just do the offset for AC. Very consistent across the board. As I mentioned earlier, only 3 of our 20 top classes of business were seasonally related for the balance of the quarter as well.

Speaker #3: And SRS was pressured by the lack of that activity. And you could actually see that in statistics that are published out in the market.

Speaker #3: I think shingle shipments, Billy, were down 27, 29 percent, something like that, in the fourth quarter.

Speaker #2: That's right.

Speaker #3: But look, we're early in the second half, and we'll see how that all pans out. We do expect that SRS will deliver mid-single-digit organic growth for the year.

Richard McPhail: As far as SRS goes, it is true that they have accelerated through the year. In the H2 of 2025, we saw the least amount of storm activity in many years, and SRS was pressured by the lack of that activity. You could actually see that in statistics that are published out in the market. I think shingle shipments, Billy, were down 27%, 29%.

Richard McPhail: As far as SRS goes, it is true that they have accelerated through the year. In the H2 of 2025, we saw the least amount of storm activity in many years, and SRS was pressured by the lack of that activity. You could actually see that in statistics that are published out in the market. I think shingle shipments, Billy, were down 27%, 29%.

Uh, it's as simple as this in 2025 that happened at the end of June. So that would have been in our period 5 number. And then in 2026, this past quarter, um, that happened in the July comp, so that shift in and of itself would have normalized, both the June and July comps. And then I'll just go 1 step further as it relates to May, and obviously, you have the spring portion there. That's heavily driven by by the north, but week 14, which obviously would have been our first week of the quarter. We saw significantly bad weather everywhere across the country, and when you extract just that week out from Mei Mei was literally the exact same comp performance as we had, in June and July when you just do the offset for AC. So, very consistent across across the board. And as I mentioned earlier, only 3 of our 20, um, top classes of business were seasonally related for for the balance of the quarter as well.

Speaker #3: But I think it's also important to point out things that we're excited about. It's not just SRS by itself. But how all of this is coming together.

Speaker #3: And look, when you talk about the pro, it really starts in the stores and when we think about SRS, and maybe let's talk about what we're seeing within the center of a quote center.

Speaker #3: Sorry, the stores and equipment.

Speaker #2: Yeah. No. Super excited about what SRS brings to the table and what we're enabling in the store. So for many of you, you know quote centers or marketplace that has historically allowed our stores to enable larger product sales through this third-party network that we of distributors.

Billy Bastek: Yeah.

Billy Bastek: Yeah.

Richard McPhail: Something like that in the Q4.

Richard McPhail: Something like that in the Q4.

Billy Bastek: That is right.

Billy Bastek: That is right.

Richard McPhail: Look, we are early in the H2, and we will see how that all pans out. We do expect that SRS will deliver mid-single digit organic growth for the year. I think it is also important to point out things that we are excited about. It is not just SRS by itself, but how all of this is coming together. Look, when you talk about the pro, it really starts in the stores. When we think about SRS, Ann, maybe let us talk about what we are seeing within the center of Quote Center.

Richard McPhail: Look, we are early in the H2, and we will see how that all pans out. We do expect that SRS will deliver mid-single digit organic growth for the year. I think it is also important to point out things that we are excited about. It is not just SRS by itself, but how all of this is coming together. Look, when you talk about the pro, it really starts in the stores. When we think about SRS, Ann, maybe let us talk about what we are seeing within the center of Quote Center.

Speaker #2: Now that we own SRS and GMS, to your point, Richard, our pro and sales team have access to this SRS full catalog. And now we're able to close sales within the Home Depot family, which is just fantastic.

Speaker #2: Given our customers this higher level of service capability than before. And just a couple of stats, I think, which is pretty kind of exciting.

Speaker #2: Is that sales through the quote center facilitated by SRS is growing rapidly. And the adoption is fantastic. And within the last 12 months, 90% of our stores have closed a sale through SRS.

Ann-Marie Campbell: Yeah.

Ann-Marie Campbell: Yeah.

Richard McPhail: Sorry, in the stores and Quote Center.

Richard McPhail: Sorry, in the stores and Quote Center.

Ann-Marie Campbell: No. Super excited about what SRS brings to the table and what we are enabling in the store. For many of you know Quote Center is our marketplace that has historically allowed our stores to enable larger product sales through this third party network of distributors. Now that we own SRS and GMS Inc., to your point, Richard, our Pro and sales team have access to this SRS full catalog, and now are able to close sales within The Home Depot family, which is just fantastic. Giving our customers this higher level of service capability than before. Just a couple of stats I think which is pretty kind of exciting, is that sales through the Quote Center facilitated by SRS is growing rapidly and the adoption is fantastic. Within the last 12 months, 90% of our stores have closed a sale through SRS.

Ann-Marie Campbell: No. Super excited about what SRS brings to the table and what we are enabling in the store. For many of you know Quote Center is our marketplace that has historically allowed our stores to enable larger product sales through this third party network of distributors. Now that we own SRS and GMS Inc., to your point, Richard, our Pro and sales team have access to this SRS full catalog, and now are able to close sales within The Home Depot family, which is just fantastic. Giving our customers this higher level of service capability than before. Just a couple of stats I think which is pretty kind of exciting, is that sales through the Quote Center facilitated by SRS is growing rapidly and the adoption is fantastic. Within the last 12 months, 90% of our stores have closed a sale through SRS.

Speaker #2: And so when you start there, and/or associates in-store understand the full catalog and the capability that SRS will it brings, it just brings confidence to that entire team.

Speaker #2: And we're able to leverage the entire ecosystem.

Speaker #3: And so it really it starts with the stores and then expands to really the all the components we've built in pro and just specifically at SRS, again.

Speaker #3: We're capturing significant incremental sales to home builders, commercial customers, and remodelers across the verticals because you think about the combination of product catalog across Home Depot and SRS, like Ann pointed out.

But how, um, all of this is coming together. And, you know, look, when you talk about the pro, it really starts in the stores and when we think about SRS, and maybe let's talk about what we're seeing with with, in the center of a quote Center, so I can store some equipment. No. Uh, super excited about what SRS brings to the table and what we're enabling in the store. So, uh, for many of you, you know, quotes and it's a Marketplace that has historically allowed our stores to enable large product sales through this third party Network that we, you know, of Distributors now that we own SRS and GMS, you know, to your point Richard you know or Pro and sales team have access to this SRS full catalog and now are able to close sales within the Home Depot family which is just fantastic. Giving our customers just a higher level of service capability than before and just a couple of stats, I think, which is, you know, pretty kind of, you know, exciting is that sales to the code Center facility

Speaker #3: And now GMS and HVAC, this expanded catalog is resonating. And our pro customers tell us that what we're building is unique and it's truly compelling for them.

Ann-Marie Campbell: When you start there and our associates in store understand the full catalog and the capability that SRS brings, it just brings confidence to that entire team, and we are able to leverage the entire ecosystem.

Ann-Marie Campbell: When you start there and our associates in store understand the full catalog and the capability that SRS brings, it just brings confidence to that entire team, and we are able to leverage the entire ecosystem.

Speaker #1: Thank you for that. And my follow-up is, as you think about the tariff dynamics and the second quarter and how it plays out into the back half, and into 2027, was there any SG&A shift into Q2 that is some of the offset to the gross margins negative gross margin headwind in the third quarter?

Facilitating by SRS, it's growing rapidly. And the adoption is fantastic. And within the last 12 months, 90% of our stores are closed to sales through SRS. And so when you start there and or Associates in store, understand the full catalog, and the capability that SRS will, it brings it just brings confidence to that entire team and we're able to leverage the entire ecosystem.

Richard McPhail: Really, it starts with the stores and then expands to really all the components we have built in Pro. Specifically at SRS, again, we are capturing significant incremental sales to home builders, commercial customers, and remodelers across the verticals. Because you think about the combination of product catalog across The Home Depot and SRS, like Ann pointed out, and now GMS Inc. and HVAC, this expanded catalog is resonating. Our Pro customers tell us that what we are building is unique and it is truly compelling for them.

Richard McPhail: Really, it starts with the stores and then expands to really all the components we have built in Pro. Specifically at SRS, again, we are capturing significant incremental sales to home builders, commercial customers, and remodelers across the verticals. Because you think about the combination of product catalog across The Home Depot and SRS, like Ann pointed out, and now GMS Inc. and HVAC, this expanded catalog is resonating. Our Pro customers tell us that what we are building is unique and it is truly compelling for them.

Speaker #1: And then as you get to '27, is the message is we're starting clean into '27, so we're going to build off where our guide is currently.

And and so, it really, it, it starts with the stores and then expands to, to Really the, all the components we built in Pro and just specifically at SRS again, we're capturing significant incremental sales to homebuilders commercial, customers and remodelers.

Speaker #1: So is the message that ultimately should oil prices and energy prices stay here, we'll do something, whether it's pricing or efficiencies that'll ultimately mitigate that so it's not a divot in the out year?

Across the verticals, because you think about the combination of product catalog across Home Depot and SRS, like I pointed out, and now GMS and HVAC, this expanded catalog is resonating. And our process customers tell us that what we're building is unique and it's truly compelling for them.

Christopher Horvers: Thank you for that. My follow-up is, as you think about the tariff dynamics in Q2 and how it plays out into the H2 and into 2027, was there any SG&A shift into Q2 that is some of the offset to the negative gross margin headwind in Q3? As you get to 2027, the message is we are starting clean into 2027, so we are going to build off where our guide is currently. Is the message that ultimately should oil prices and energy prices stay here, we will do something, whether it is pricing or efficiencies, that will ultimately mitigate that, so it is not a divot in the out year?

Christopher Horvers: Thank you for that. My follow-up is, as you think about the tariff dynamics in Q2 and how it plays out into the H2 and into 2027, was there any SG&A shift into Q2 that is some of the offset to the negative gross margin headwind in Q3? As you get to 2027, the message is we are starting clean into 2027, so we are going to build off where our guide is currently. Is the message that ultimately should oil prices and energy prices stay here, we will do something, whether it is pricing or efficiencies, that will ultimately mitigate that, so it is not a divot in the out year?

Speaker #2: Thank you, Chris. So that's right. I think the most important point you made there is that we've reaffirmed guidance, and our jumping-off point from the end of the year is a clean jumping-off point.

Speaker #2: With respect to Q2 expenses, I think we gave the indication earlier this year expenses are going to be a little bit lumpy through the year.

Speaker #2: We had FIFA marketing expense, which wound up being an incredible campaign for us, by the way. And so I wouldn't really put much into the expense.

Speaker #2: Over the year, that will likely land exactly where we anticipate it would have. But look, we're accustomed to managing around any cost environment, right, Billy?

Richard McPhail: Thank you, Chris. That is right. I think the most important point you made there is that we have reaffirmed guidance and our jumping off point from the end of the year is a clean jumping off point. With respect to Q2 expenses, I think we gave the indication earlier this year, expenses are going to be a little bit lumpy through the year. We had FIFA marketing expense, which wound up being an incredible campaign for us, by the way. I would not really put much into the expense. Over the year, that will likely land exactly where we anticipate it would have. Look, we are accustomed to managing any cost environment, right, Billy?

Richard McPhail: Thank you, Chris. That is right. I think the most important point you made there is that we have reaffirmed guidance and our jumping off point from the end of the year is a clean jumping off point. With respect to Q2 expenses, I think we gave the indication earlier this year, expenses are going to be a little bit lumpy through the year. We had FIFA marketing expense, which wound up being an incredible campaign for us, by the way. I would not really put much into the expense. Over the year, that will likely land exactly where we anticipate it would have. Look, we are accustomed to managing any cost environment, right, Billy?

Thank you for that. And and my follow-up is as you think about the Tariff Dynamics, and the second quarter and how it plays out into the back half and into 2027, you know, was there any sgna shifts into 2q? That is some of the offset to the gross margins. Maybe a gross margin had went in the third quarter and then as you get that 27 is the the message is we're starting clean and the 27. So we're going to build off where our guide is currently. So so is the message that you know ultimately should oil prices and energy prices. Stay here, we'll do something whether it's pricing or efficiencies that will ultimately mitigate that. So it's not a divot in the out-year.

Speaker #3: Yeah. I mean, this almost seems normalized a little bit from where we've been historically and certainly in 2025. I'm not sure all the teams feel that way, but listen, we've got a great track record of being able to manage that.

Speaker #3: Inflationary environments, deflationary environments, and feel great about our ability to be able to create value for our customers every day, the most important thing.

Thank you, Chris. So that's right. I think the most important point you made there is that we've reaffirmed guidance, and our jumping-off point from the end of the year is a clean jumping-off point. With respect to Q2 expenses, you know, I think we...

Speaker #3: And continue into enhance the capabilities that we've talked about today. And work towards that frictionless customer experience.

You know, we gave the indication earlier this year that expenses are going to be a little bit lumpy through the year. We had FIFA marketing expense, which wound up being an incredible campaign for us, by the way.

Speaker #1: Understood. Thank you so much.

Speaker #2: Thank you.

Speaker #4: Our next question comes from a line of Jihan Ma with Bernstein. Please proceed with your question.

Speaker #5: Hi. Thank you for taking my question. Just a follow-up on the ticket side of things. As you start lapping some of the tariff-driven price increases from last year, but obviously you're also facing continued cost headwinds, how do you think about AUR for the back half of the year?

Billy Bastek: Yeah. This almost seems normalized a little bit from where we have been historically, certainly in 2025. I am not sure all of the teams feel that way, but listen, we have got a great track record of being able to manage that. Inflationary environments, deflationary environments, and feel great about our ability to be able to create value for our customers every day, the most important thing, and continuing to enhance the capabilities that we have talked about today and work towards that frictionless customer experience.

Billy Bastek: Yeah. This almost seems normalized a little bit from where we have been historically, certainly in 2025. I am not sure all of the teams feel that way, but listen, we have got a great track record of being able to manage that. Inflationary environments, deflationary environments, and feel great about our ability to be able to create value for our customers every day, the most important thing, and continuing to enhance the capabilities that we have talked about today and work towards that frictionless customer experience.

And so I I I wouldn't really put much into the into the expense uh oh over the year that will likely land exactly where we anticipated, it would have. Uh, but look, we're we're accustomed to managing, um, throughout any cost environment, right Billy. Yeah. I mean this almost seems, um, normalized a little bit from where we've been historically and certainly in in 2025. I'm not sure all of the teams feel that way, but listen, we've got a great track record of being able to manage that.

Speaker #5: And is there going to be any needs for price reinvestment?

Speaker #2: Yeah. Thanks, Jihan. I think that that's that's factored into our guide for the back half of the year that Richard talked about a little bit earlier.

Speaker #2: So we don't see any changes from what we've already communicated.

Inflationary environments, deflationary environments—we feel great about our ability to create value for our customers every day. That is the most important thing, and we are continuing to enhance the capabilities that we've talked about today.

And work towards that frictionless customer experience.

Christopher Horvers: Understood. Thank you so much.

Christopher Horvers: Understood. Thank you so much.

Speaker #5: And a longer-term question. You recently announced a organizational realignment, I think, a couple of weeks ago. Could you just share a bit of color on why the changes and the why now?

Billy Bastek: Thank you.

Billy Bastek: Thank you.

Understood, thank you so much.

Thank you.

Operator: Our next question comes from the line of Zhihan Ma with Bernstein. Please proceed with your question.

Operator: Our next question comes from the line of Zhihan Ma with Bernstein. Please proceed with your question.

Zhihan Ma: Hi. Thank you for taking my question. Just a follow-up on the ticket side of things. As you start lapping some of the tariff-driven price increases from last year, you are also facing continued cost headwinds. How do you think about AUR for the back half of the year, and is there going to be any needs for price reinvestment?

Zhihan Ma: Hi. Thank you for taking my question. Just a follow-up on the ticket side of things. As you start lapping some of the tariff-driven price increases from last year, you are also facing continued cost headwinds. How do you think about AUR for the back half of the year, and is there going to be any needs for price reinvestment?

Our next question comes from the line of Jihane Ma with Bernstein. Please proceed with your question.

Speaker #2: Yeah. Look, we're always evolving to better align our organization around our strategy. And these changes are part of what we do to evolve. They'll allow us to work smarter, move faster, and innovate more quickly.

Speaker #5: Okay. Thank you.

Speaker #6: And Christine, we have time for one more question.

Hi. Thank you for taking my question. Um, just to follow up on the ticket side of things, um, as as you start lapping some of the terrorism price increases from last year, but obviously you're also facing continued cause headwinds. How do you think about Aur for the back half of the year and is there going to be any needs for Price free investment?

Billy Bastek: Yeah. Thanks, Zhihan. I think that is factored into our guide for the back half of the year that Richard talked about a little bit earlier. We do not see any changes from what we have already communicated.

Billy Bastek: Yeah. Thanks, Zhihan. I think that is factored into our guide for the back half of the year that Richard talked about a little bit earlier. We do not see any changes from what we have already communicated.

Speaker #4: Thank you. Our final question comes from a line of Zach Fadom with Wells Fargo. Please proceed with your question.

Speaker #7: Good morning. So my first question is on cross-sell between SRS and GMS. You've talked about 400 million for the year. My first question is how you would expect that to build through the year.

Communicated.

Zhihan Ma: A longer term question. You recently announced an organizational realignment, I think a couple of weeks ago. Could you just share a bit of color on why the changes and the why now?

Zhihan Ma: A longer term question. You recently announced an organizational realignment, I think a couple of weeks ago. Could you just share a bit of color on why the changes and the why now?

Speaker #7: What did you see in Q2? What are the expectations in the second half of the year?

Richard McPhail: Yeah. Look, we are always evolving to better align our organization around our strategy, and these changes are part of what we do to evolve. They will allow us to work smarter, move faster, and innovate more quickly.

Richard McPhail: Yeah. Look, we are always evolving to better align our organization around our strategy, and these changes are part of what we do to evolve. They will allow us to work smarter, move faster, and innovate more quickly.

And, um, a longer-term question. You recently announced an organizational realignment, I think a couple of weeks ago. Could you just share a bit of color on why the changes and why now?

Speaker #2: Well, that's the amount we expect through the year, but I think it's important. It's not just among SRS and GMS. As Ann referenced, that's cross-sell we expect across the entire system.

Zhihan Ma: Okay. Thank you.

Zhihan Ma: Okay. Thank you.

Yeah. Look, we're always evolving to better align our organization around our strategy. And these changes are part of what we do to evolve. They'll allow us to work smarter, move faster, and innovate more quickly.

Speaker #2: And it actually I think you need to think about pro starting in the store. And us penetrating more deeply into the wallet of that in-store pro.

Operator: Christine, we have time for one more question. Thank you. Our final question comes from the line of Zach Fadem with Wells Fargo. Please proceed with your question.

Operator: Christine, we have time for one more question. Thank you. Our final question comes from the line of Zach Fadem with Wells Fargo. Please proceed with your question.

Okay, thank you.

Zach Fadem: Good morning. My first question is on cross-sell between SRS and GMS. You have talked about USD 400 million for the year. My first question is how you would expect that to build through the year. What did you see in Q2? What are the expectations in the second half of the year?

Zach Fadem: Good morning. My first question is on cross-sell between SRS and GMS. You have talked about USD 400 million for the year. My first question is how you would expect that to build through the year. What did you see in Q2? What are the expectations in the second half of the year?

And Christine, we have time for one more question. Thank you. Our final question comes from the line of Zack Fedom with Wells Fargo. Please proceed with your question.

Speaker #2: And Ann, maybe just comment on that.

Speaker #6: No. I do think that's where we start. Because the vast majority of our sales come from our in-store pro. And we have to win with them every day.

Good morning. So, my first question is on cross-sell.

Speaker #6: And so we've talked about this over the past few years, that we have evolved some of the things we do in-store, not only our staffing model, but we've provided tools and technology for pro desk to really enable a more effective experience for our associates and the pro they serve.

Richard McPhail: Well, that is the amount we expect through the year. I think it is important, it is not just among SRS and GMS. As Ann referenced, that is cross-sell we expect across the entire system. Actually, I think you need to think about Pro starting in the store and us penetrating more deeply into the wallet of that in-store Pro.

Richard McPhail: Well, that is the amount we expect through the year. I think it is important, it is not just among SRS and GMS. As Ann referenced, that is cross-sell we expect across the entire system. Actually, I think you need to think about Pro starting in the store and us penetrating more deeply into the wallet of that in-store Pro.

Between SRS and GMS, you've talked about $400 million for the year. My first question is, how would you expect that to build through the year? What did you see in Q2, and what are the expectations in the second half of the year?

Well, that's the amount we expect through the year. But I think it's important—it's not just among SRS and GMS.

Speaker #6: And we know our ability to grow, to share with the pros is by adding capabilities to win more of their complex purchases. And we have seen traction with those pros.

Speaker #6: We interact with these capabilities. So it's not just about SRS or one component. It's about the entire ecosystem that's really enabled us to make a difference and help invite momentum.

Ann-Marie Campbell: Yeah.

Ann-Marie Campbell: Yeah.

Richard McPhail: Ann, maybe just comment on that.

Richard McPhail: Ann, maybe just comment on that.

Ann-Marie Campbell: No. I do think that is where we start, because the vast majority of our sales come from our in-store Pro, and we have to win with them every day. We have talked about this over the past few years, that we have evolved some of the things we do in store, not only our staff and model, but we have provided tools and technology for Pro desks to really enable a more effective experience for our associates and the Pro they serve. We know our ability to grow, to share with the Pros, is by adding capabilities to win more of their complex purchases. We are seeing traction with those Pros who interact with these capabilities.

Ann-Marie Campbell: No. I do think that is where we start, because the vast majority of our sales come from our in-store Pro, and we have to win with them every day. We have talked about this over the past few years, that we have evolved some of the things we do in store, not only our staff and model, but we have provided tools and technology for Pro desks to really enable a more effective experience for our associates and the Pro they serve. We know our ability to grow, to share with the Pros, is by adding capabilities to win more of their complex purchases. We are seeing traction with those Pros who interact with these capabilities.

Speaker #6: And I think this is super important because Mike and team just continue to work on these capabilities. And Mike, you want to just add some of the things that you guys are doing?

Speaker #3: Yeah. Sure. I mean, as Richard and Ann both point out, and we continue to see very steady progress and success in our pro business from the investments made in the pro ecosystem.

Speaker #3: Notably, we see advances made in our investments in order management and delivery capabilities. This is pretty evident by us achieving the highest levels of on-time and complete for flatbed and box truck deliveries, along with the customer satisfaction scoring that we're seeing that we saw this past quarter.

Ann-Marie Campbell: So it is not just about SRS or one component, it is about the entire ecosystem that really enables us to make a difference and help drive momentum. I think this is super important because Mike and team just continue to work on these capabilities. Mike, you want to just add some of the things that you guys are doing?

Ann-Marie Campbell: So it is not just about SRS or one component, it is about the entire ecosystem that really enables us to make a difference and help drive momentum. I think this is super important because Mike and team just continue to work on these capabilities. Mike, you want to just add some of the things that you guys are doing?

Speaker #3: And these come as a result of the investments that Ann talked about and things like self-serve site instructions, along with investments in capturing our pros' business hours of operations.

As as an reference, um, that that's cross sell we expect across the entire system. And, you know, it's it, it, it actually, I think you, you need to think about Pro starting in the store, and, and US penetrating more deeply into the wallet of that in-store Pro and, and, and maybe just know. I, I do think that's where we start, um, because the best and the majority of our sales come from our in store Pro, and we have to win with them every day. And so we've talked about this over the past few years that we have evolved. Uh, some of the things we do in store, not only are staff and model but we're provided tools and technology for products that really enable a more effective experience um, for, or Associates in the Pro. They serve and we know our ability to grow to share with the pros is by adding capabilities to win more of their complex purchases. And we have seen traction with those pros and we interact with these capabilities. So it's not just about

Speaker #3: And continue to advances in delivery tracking capabilities, which help around visibility and transparency. And on top of this, the investments in our B2B experience are resulting in outsized online growth with our pros.

[Company Representative] (The Home Depot): Yeah, sure. As Richard and Ann both pointed out, we continue to see very steady progress and success in our Pro business from the investments made in the Pro ecosystem. Notably, we see advances made in our investments in order management and delivery capabilities. This is pretty evident by us achieving the highest levels of on time and complete for flatbed and box truck deliveries, along with the customer satisfaction scoring that we are seeing this past quarter. These come as a result of the investments that Ann talked about, things like self-serve site instructions, along with investments in capturing our Pro's business hours of operations, and continued advances in delivery tracking capabilities, which help around visibility and transparency. On top of this, the investments in our B2B experience are resulting in outsized online growth with our Pros.

Mike Rowe: Yeah, sure. As Richard and Ann both pointed out, we continue to see very steady progress and success in our Pro business from the investments made in the Pro ecosystem. Notably, we see advances made in our investments in order management and delivery capabilities. This is pretty evident by us achieving the highest levels of on time and complete for flatbed and box truck deliveries, along with the customer satisfaction scoring that we are seeing this past quarter. These come as a result of the investments that Ann talked about, things like self-serve site instructions, along with investments in capturing our Pro's business hours of operations, and continued advances in delivery tracking capabilities, which help around visibility and transparency. On top of this, the investments in our B2B experience are resulting in outsized online growth with our Pros.

Speaker #3: And that includes the increasing use of our project planning tool. Which helps us organize and stage deliveries for larger, more complex pros. We're also seeing pros build material lists and purchase more with the use of our AI-powered material list builder.

SRS or one component—it's about the entire ecosystem. That's what really enables us to make a difference and help drive momentum. And I think this is super important because my team just continues to work on these capabilities. And, uh, Mike, you want to just add, you know, some of the things that you guys are doing? Yeah, sure. I mean, as Richard and Dan both point out, we continue to see very steady progress and success in our Pro business from the investments made in the Pro ecosystem. Notably, we see advances made in our...

Speaker #3: And we continue to invest in search and our B2B experience, along with improvements to the app, making it much more responsive and faster. So these capabilities allow us to earn a greater wallet share with the pro and coming all the way back to some of the specific of your questions, Zach.

Speaker #3: And Ann talked about quote center and the success that we've seen there. We've had success in the past working with HD Supply and the purchase card that their customers use inside of our stores.

Speaker #3: And we've started to roll out the SRS. Purchase card as well to be able to use in our stores. And as you pointed out, things like national production home builders, SRS itself leveraging GMS in terms of those relationships in the past, we've seen a lot of success with this year.

[Company Representative] (The Home Depot): That includes the increasing use of our project planning tool, which helps us organize and stage deliveries for larger, more complex Pros. We are also seeing Pros build material lists and purchase more with the use of our AI-powered material list builder. We continue to invest in search and our B2B experience, along with improvements to the app, making it much more responsive and faster. These capabilities allow us to earn a greater wallet share with the Pro. Coming all the way back to some of the specifics of your question, Zach, Ann talked about Quote Center and the success that we have seen there. We have had success in the past working with HD Supply and the purchase card that their customers use inside of our stores. We have started to roll out the SRS purchase card as well to be able to use in our stores.

Mike Rowe: That includes the increasing use of our project planning tool, which helps us organize and stage deliveries for larger, more complex Pros. We are also seeing Pros build material lists and purchase more with the use of our AI-powered material list builder. We continue to invest in search and our B2B experience, along with improvements to the app, making it much more responsive and faster. These capabilities allow us to earn a greater wallet share with the Pro. Coming all the way back to some of the specifics of your question, Zach, Ann talked about Quote Center and the success that we have seen there. We have had success in the past working with HD Supply and the purchase card that their customers use inside of our stores. We have started to roll out the SRS purchase card as well to be able to use in our stores.

Speaker #2: So just to thank you, Mike, and to wrap it up, look, the teams across pro have never worked more tightly together. We're seeing great momentum.

Are not investments in order management and delivery capabilities. This is pretty evident by us, you know, achieving the highest levels of on time and complete for Flatbed, uh, and box truck deliveries along with the customer satisfaction scoring that we're seeing. Uh, we saw this past quarter, um, and these come as a result of the Investments That an talked about and things like self-serve sight, instructions along with investments, in capturing our Pros, business hours of operations, uh, and continued advances in delivery, uh, tracking capabilities, which help around visibility, uh, and transparency. And on top of this, you know, the investments in our B2B experience, are resulting in outsized online growth with our Pros, um, and that includes the increasing use of our project planning Tool, uh, which helps us organize and Stage deliveries for larger more complex Pros. Uh, we're also seeing Pros build material list and purchase more with the use of our AI powered material list Builder, um, and we continue to invest in Search and our B.

Speaker #2: And we think we're building something unique in the marketplace that's never existed before. And our customers tell us it's resonating with them. And that's why we think we've seen the success we have so far this year.

Speaker #7: Really appreciate all the color. And just a quick follow-up, because I don't want to belabor the gross margin question too much, but just to iron out the confusion bridging the gap from Q2 to the second half of the year.

[Company Representative] (The Home Depot): As you pointed out, with things like national production home builders, SRS itself leveraging GMS Inc. in terms of those relationships in the past, we have seen a lot of success with this year.

Mike Rowe: As you pointed out, with things like national production home builders, SRS itself leveraging GMS Inc. in terms of those relationships in the past, we have seen a lot of success with this year.

To be experienced along with improvements, uh, to the app, making it much more responsive and faster. Um, so these capabilities, you know, allow us to earn a greater wallet, share with the pro and coming all the way back to, you know, some of the specific of your questions Zach and an talked about, you know, quote Center and the success that we've seen there, you know, we've had success in the past, you know, working with HD Supply and the purchase cards that their customers use inside of our stores. And we've started to roll out the SRS, you know, Purchase card as well to be able to use in our stores.

Speaker #7: We know tariff refund, that benefit rolls off from Q1 to Q2 to Q3. That roughly 60 basis points of GMS mix pressure, that also rolls off.

Richard McPhail: Just to thank Mike and to wrap it up. The teams across Pro have never worked more tightly together. We are seeing great momentum, and we think we are building something unique in the marketplace that has never existed before, and our customers tell us it is resonating with them, and that is why we think we have seen the success we have so far this year.

Richard McPhail: Just to thank Mike and to wrap it up. The teams across Pro have never worked more tightly together. We are seeing great momentum, and we think we are building something unique in the marketplace that has never existed before, and our customers tell us it is resonating with them, and that is why we think we have seen the success we have so far this year.

Um, and as you pointed out with things like national production home builders, you know, SRS itself leveraging GMS in terms of those relationships in the past. We've seen a lot of success with this year.

Speaker #7: I just could we help understand whether the 60 basis points of fuel and freight is transitory versus something like a freight contract that would enter the base for a year or longer?

Speaker #2: Yeah. You're mostly talking about market-borne pressure incrementally, kind of across product input costs and across fuel and energy. But just maybe to answer your question specifically, since we've had a couple of questions on it, the timing of the refunds, again, created a timing benefit in gross margin that you're likely going to see offset to a degree in Q3, right?

Zach Fadem: Really appreciate all the color, and just a quick follow-up, because I do not want to belabor the gross margin question too much, but just to iron out the confusion bridging the gap from Q2 to the H2 of the year. We know tariff refunds, that benefit rolls off from Q2 to Q3. The roughly 60 basis points of GMS mix pressure, that also rolls off. Could we help understand whether the 60 basis points of fuel and freight is transitory versus something like a freight contract that would enter the base for a year or longer?

Zach Fadem: Really appreciate all the color, and just a quick follow-up, because I do not want to belabor the gross margin question too much, but just to iron out the confusion bridging the gap from Q2 to the H2 of the year. We know tariff refunds, that benefit rolls off from Q2 to Q3. The roughly 60 basis points of GMS mix pressure, that also rolls off. Could we help understand whether the 60 basis points of fuel and freight is transitory versus something like a freight contract that would enter the base for a year or longer?

So just to to thank you Mike and to, to wrap it up, look the the teams across pro has has never worked. Um, more tightly together. Uh we're seeing great momentum um and we think we're building something unique in the marketplace, that's never existed before. And our customers tell us, it's resonating with them. And that's why we think we've seen the success. We have so far this year

Bridging the gap from Q2 to the second half of the year, we know tariff refunds that benefit roll off from Q1 to Q2.

Speaker #2: So the benefit was seen in Q2. We are able to use that economic benefit to offset costs. And that offset is largely a Q2 and Q3 kind of dynamic.

Speaker #2: And then again, just to repeat it, by Q4, we expect that we will see our gross margin to be relatively flat versus last year.

Richard McPhail: You are mostly talking about market-born pressure incrementally kind of across product input costs and across fuel and energy. Just maybe to answer your question specifically, since we have had a couple of questions on it. The timing of the refunds, again, created a timing benefit in gross margin that you are likely going to see offset to a degree in Q3, right? The benefit was seen in Q2. We are able to use that economic benefit to offset costs, and that offset is largely a Q2 and Q3 kind of dynamic. Then again, just to repeat it, by Q4, we expect that we will see our gross margin to be relatively flat versus last year.

Richard McPhail: You are mostly talking about market-born pressure incrementally kind of across product input costs and across fuel and energy. Just maybe to answer your question specifically, since we have had a couple of questions on it. The timing of the refunds, again, created a timing benefit in gross margin that you are likely going to see offset to a degree in Q3, right? The benefit was seen in Q2. We are able to use that economic benefit to offset costs, and that offset is largely a Q2 and Q3 kind of dynamic. Then again, just to repeat it, by Q4, we expect that we will see our gross margin to be relatively flat versus last year.

To Q3, that roughly 60 basis points of GMS mix pressure that also rolls off. I just—could we help understand whether the 60 basis points of fuel and freight is transitory versus something like a freight contract that would enter the base for a year or longer?

Speaker #7: Thanks for all the time.

Speaker #2: Thank you.

Yeah. You're you're you're mostly talking about market Horn. You know, pressure incrementally kind of a cross product input costs across Fuel and and energy. Um but just maybe to answer your question specifically since we've had a couple questions on it.

Speaker #1: Ms. Jancy, I'd like to turn the floor back over to you for closing comments.

Speaker #6: Thank you, everyone, for joining us today. We look forward to speaking with you on our third quarter earnings call in November.

Speaker #1: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Um, you know, the the, the timing of the refunds again, created a, a timing benefit in Gross margins that you're likely going to see offset to a degree in Q3, right? So the benefit was seen in Q2, we are able to use that economic benefit to offset costs, um, and that offset is largely a Q2 and Q3, uh, kind of, uh, uh, uh, Dynamic. And then again, just to repeat it.

By 2024, we expect that we will see our gross margin to be relatively flat versus last year.

Zach Fadem: Thanks for all the time.

Zach Fadem: Thanks for all the time.

Richard McPhail: Thank you.

Richard McPhail: Thank you.

Thanks for all the time.

Operator: Janci, I'd like to turn the floor back over to you for closing comments.

Operator: Janci, I'd like to turn the floor back over to you for closing comments.

Thank you.

[Company Representative] (The Home Depot): Thank you everyone for joining us today. We look forward to speaking with you on our Q3 earnings call in November.

Ann-Marie Campbell: Thank you everyone for joining us today. We look forward to speaking with you on our Q3 earnings call in November.

Miss Janci, I'd like to turn the floor back over to you for closing comments.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Thank you, everyone, for joining us today. We look forward to speaking with you on our third quarter earnings call in November.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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This summer, get organized and save big with the Home Depot Summer Storage Event. Make the most of your space with innovative storage solutions, while saving along the way. Discover new waterproof totes that help protect everything from camping gear and fishing equipment to pool inflatables and outdoor accessories.

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