Good morning.
Home Depot, the home improvement retail giant, is showing signs of agility amid economic uncertainty—but selective price adjustments loom.
For its second fiscal quarter that ended Aug. 3, Home Depot,
No. 24 on the Fortune 500,
reported net sales of $45.28 billion, up 4.9% year over year and slightly below expectations, with net income holding steady at $4.6 billion. The company reaffirmed its full-year outlook, projecting total sales to rise 2.8% and comparable sales by about 1%.
On Tuesday’s earnings call, CEO Ted Decker attributed this solid performance to ongoing investments in technology, enhanced services for professional customers, and faster delivery options—all aimed at elevating the customer experience.
Meanwhile, CFO Richard McPhail noted that while the core customer—homeowners and pros—remains healthy, many are opting for smaller projects due to high interest rates, which have held between 4.25% and 4.5% since late 2024. Larger remodeling projects that would require debt financing are being postponed, he said.
Pricing moves and investment strategyTariff concerns are creating ongoing headwinds. For some imported goods, tariff rates are significantly higher today than they were at this time last quarter, according to Home Depot.
Customers will see “some modest price movement for some categories,” but there won’t be broad-based hikes, McPhail told
the Wall Street Journal. With more than half of its products sourced domestically, Home Depot has some insulation from global volatility but is not immune to it.
“I think they’ll rely on dynamic pricing to protect their gross margin without alienating customers,” Jaime M. Katz, senior equity analyst at Morningstar, told me about Home Depot. “They’re not raising prices across the board, but targeting increases where the market can bear it.” This strategy lets them keep prices low in more price-sensitive categories, especially when consumer demand is uncertain, Katz said.
Home Depot’s overall strategy appears to be gaining momentum. The company is outpacing a 1% industry decline, gaining market share, and its recent acquisition of
GMS (Gypsum Management and Supply) for $4.3 billion is expected to further boost sales and profits, Katz wrote in a Tuesday analyst note. Morningstar now plans to raise its fair value estimate for Home Depot, citing benefits from these deals and overall performance.
The
GMS deal follows the company’s $18 billion acquisition last year of SRS Distribution, which is the entity actually buying GMS.
“You’ve seen us lean into a variety of investments over the last five years,” McPhail said on the call. “What might surprise you is that many of these investments are more capital-light and have a higher return profile than some of our more conventional investments.”
For example, an SRS branch requires less capital relative to sales than a typical Home Depot store, and generates returns more quickly, he said. However, Home Depot also views its stores as a treasury because they are valuable investments, according to McPhail.
As Home Depot adapts with targeted pricing, strategic acquisitions, and expansion, it aims to position itself for continued growth, regardless of the broader economic environment.
Sheryl Estradasheryl.estrada@fortune.com 
