Group 1 - The health of the U.S. consumer is a primary concern for the company, with a focus on the outlook for housing [1] - There was noticeable momentum in the business during the second quarter, indicating broader growth compared to previous periods [1] - The company is observing positive consumer behavior and anticipates continued growth moving forward [1]

Core Insights - Home Depot is focusing on balancing investments with shareholder returns and debt obligations, investing approximately $915 million in Q2 while distributing around $2.3 billion in dividends [1][8] - The company generated operating cash flow of about $8,968 million in the first half of fiscal 2025, which supported capital expenditures, dividends, and debt reduction [2][8] - Home Depot's long-term debt decreased to approximately $45,917 million, with no share repurchases planned for fiscal 2025 as the company prioritizes disciplined capital expenditures and debt reduction [3][4][8] Financial Performance - In the first half of fiscal 2025, Home Depot covered $1,723 million in capital expenditures and $4,574 million in cash dividends, with the remainder used for debt reduction of roughly $1,515 million [2][8] - Interest expenses for the second quarter were reported at $575 million, with full-year net interest expenses expected to reach $2.2 billion [3] Capital Expenditures and Shareholder Returns - Capital spending for fiscal 2025 is projected to be around 2.5% of total sales, focusing on expanding distribution networks and digital capabilities [1] - Share repurchase activity is currently on hold, with management indicating no plans to resume buybacks in fiscal 2025 [4] Market Position and Valuation - Home Depot shares have increased by 11.5% over the past year, outperforming the industry growth of 8% [7] - The company trades at a forward price-to-earnings ratio of 25.70, which is higher than the industry average of 23.00 [9] Sales and Earnings Estimates - The Zacks Consensus Estimate for Home Depot's current financial-year sales suggests a year-over-year growth of 2.9%, while earnings per share are expected to decline by 1.4% [10]

Financial Data and Key Metrics Changes - The company reported a positive comp for Q2, marking the third consecutive quarter of positive comps, indicating a significant momentum shift compared to the previous year when there were eight quarters of negative comps [7][12] - Home prices have appreciated by approximately 50% since the end of 2019, contributing to a healthy consumer base with significant equity in their homes [8][10] Business Line Data and Key Metrics Changes - In Q2, 13 out of 16 departments in the U.S. experienced positive comps, with a broad-based impact across various categories, including concrete, dimensional lumber, and water heaters [13][14] - The company is taking market share in both consumer and pro segments, with growth in virtually every category outpacing the marketplace [16] Market Data and Key Metrics Changes - The housing market is experiencing a fundamental shortage, with housing turnover at forty-year lows, which is impacting consumer engagement in larger projects [10][12] - Economic uncertainty is cited as a reason for consumers not engaging in big projects, despite having significant untapped equity in their homes [11][12] Company Strategy and Development Direction - The company continues to focus on building out pro capabilities and enhancing digital platforms to engage consumers effectively [16][30] - Capital allocation strategy remains consistent, prioritizing investments in core business, paying dividends, and considering acquisitions to enhance capabilities [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the consumer environment improving in the second half of the year, driven by tax cut benefits [52] - The company is focused on maintaining competitive pricing while managing tariff impacts and ensuring project protection [21][23] Other Important Information - The company has made significant investments in supply chain improvements, enhancing speed and delivery capabilities, which have positively impacted online business growth [44][50] - The company is actively managing its assortment planning in response to tariff impacts and market conditions [26][28] Q&A Session Summary Question: What is the outlook for the consumer environment in the second half? - Management expects the environment to be better as tax cut benefits start to flow through to consumers [52] Question: Have there been any elasticity impacts from pricing actions? - Management noted that there is not much elasticity in their products, and they are closely monitoring pricing across the board [53] Question: What are the expectations for inventory growth in the second half? - Management indicated that there will be no significant changes in inventory growth, maintaining a business-as-usual approach [57] Question: What are the expectations for non-tariff margin drivers? - Management affirmed that operating costs will largely remain the same in the back half of the year [59] Question: What is the outlook for market share consolidation in the retail space? - Management believes that competitive dynamics will remain largely unchanged, with some potential for consolidation in the distribution space [61]

Financial Data and Key Metrics Changes - The company reported a positive momentum shift in Q2, with third-quarter positive comps, contrasting with the previous year's eight quarters of negative comps [4][5] - Home prices have appreciated by approximately 50% since the end of 2019, contributing to a healthier consumer base [5] - The company noted a significant amount of untapped equity in homes, which has not yet translated into increased consumer spending on large projects [8] Business Line Data and Key Metrics Changes - In Q2, 13 out of 16 departments in the U.S. experienced positive comps, indicating broad-based growth across various categories [11] - The company is taking market share in both consumer and professional segments, with growth in virtually every category outpacing the marketplace [14] Market Data and Key Metrics Changes - The housing market is described as being close to frozen, with housing turnover at forty-year lows, which is impacting consumer engagement in larger projects [6][7] - Despite economic uncertainties, the company believes that consumer engagement in home improvement will eventually increase as people become accustomed to current economic conditions [9] Company Strategy and Development Direction - The company is focused on enhancing its pro capabilities through acquisitions and organic growth strategies, aiming to capture more share of wallet from existing customers [30][36] - The company has made significant investments in supply chain improvements and digital assets to enhance delivery speed and customer service [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, anticipating improvements as tax cuts benefit consumers [51] - The company is closely monitoring pricing elasticity and consumer behavior in response to recent price adjustments, indicating a cautious but proactive approach [52] Other Important Information - The company has diversified its supply chain to mitigate tariff impacts, with over 50% of goods manufactured in the U.S. [17][18] - The company is committed to maintaining competitive pricing while protecting project costs, which is crucial for customer retention [21][22] Q&A Session Summary Question: What is the outlook for the consumer environment in the second half? - Management expects the environment to improve as tax cut benefits flow through to consumers [51] Question: Have there been any elasticity impacts from recent pricing actions? - Management noted that there is not much elasticity in their product pricing and is closely monitoring pricing tests [52] Question: What are the expectations for inventory growth in the second half? - Management indicated that there will be no significant changes in inventory growth, maintaining a business-as-usual approach [56] Question: What are the expectations for non-tariff margin drivers into 2026? - Management affirmed that operating costs will remain largely unchanged, with further discussions planned for the investor conference [58] Question: What is the outlook for market share consolidation in the retail space? - Management believes that competitive dynamics will remain stable, with some potential for consolidation in the distribution space [60]

Core Insights - Arthur M. Blank, co-founder of Home Depot, has transitioned from retail to sports and investment, now focusing on his family office, AMBFO, which manages his wealth and business affairs [1][2][3] - The appointment of Andrea DeMarco as the new CEO of AMBFO signifies a commitment to professional management and the continuation of wealth growth and legacy for the Blank family [2][3] Company Overview - Home Depot, founded by Blank and Bernie Marcus, revolutionized the home improvement retail sector with its warehouse-style stores and a focus on DIY services, growing from $22 million in revenue in 1981 to $2.8 billion by 1990 [7][8] - The company currently operates over 2,300 stores in North America, with projected revenues exceeding $159.5 billion in 2024, maintaining its position as the largest home improvement retailer globally [8] Business Empire - The Blank family's business interests extend beyond Home Depot, encompassing sports teams like the Atlanta Falcons and Atlanta United, as well as various real estate and entertainment ventures [9][10][12] - The AMB Sports & Entertainment company, under Blank's leadership, has seen significant growth, with the Atlanta Falcons valued at approximately $2.2 billion [9] Philanthropic Efforts - The Arthur M. Blank Family Foundation, established in 1995, has donated over $1 billion to various causes, emphasizing education, healthcare, and community development [21][24] - Blank's commitment to philanthropy includes a pledge to donate at least 95% of his family's wealth to charitable causes, reflecting a strong focus on social responsibility [24]

Group 1: Home Depot - Home Depot's shares rose over 3% after Q2 earnings release despite slightly missing sales and adjusted EPS, maintaining full-year guidance [2][4] - The company sources nearly 50% of its products internationally, making tariffs a significant issue, especially with current higher tariff rates [3] - The stock received another boost of nearly 4% following positive market reactions to the Federal Reserve's comments on potential rate cuts, which could increase housing affordability and demand for home improvement products [5][4] - Analysts raised their price targets for Home Depot after the earnings report, with only JPMorgan Chase lowering its target [6] Group 2: TJX Companies - TJX Companies experienced a nearly 3% gain in shares after a strong Q2 report, beating Wall Street expectations with a 9-cent increase in adjusted EPS and nearly 7% revenue growth [7][8] - Comparable sales increased by 4%, matching the prior year's quarter, and the company raised its full-year guidance for comparable sales growth to 3% from 2%-3% [8] - TJX expects full-year adjusted EPS to reach approximately $4.55, up nearly 4% from previous guidance, aided by lower-than-expected tariff costs [8][9] - The company plans to add around 130 stores this year and aims for over 1,800 locations in the long term [9] Group 3: Target - Target's Q2 results showed a nearly 1% decline in sales and nearly 2% drop in comparable sales, indicating a loss of market share to Walmart, which reported sales growth of 4.8% [11][12] - Despite beating estimates on sales and adjusted EPS, Target's guidance projected a low single-digit decline in sales for the full fiscal year, with steady adjusted EPS guidance [12] - Target's CEO Brian Cornell will vacate his position in February 2026, with COO Michael Fiddelke set to succeed him, amid business uncertainty that has led to an 8% decline in shares since the earnings report [13]

Group 1 - The article initiates coverage on Lowe's Companies (NYSE: LOW) and Home Depot (NYSE: HD), highlighting their significance in the U.S. home improvement market [1] - The retail sector has been notably impacted by tariffs, affecting pricing and consumer behavior [1] Group 2 - The author emphasizes a contrarian investment approach, leveraging extensive industry experience to identify potential investment opportunities [1]

Core Viewpoint - The overall performance of the retail sector in Q2 shows resilience, but the outlook for the second half of the year is cautious due to uncertainties such as tariff impacts and potential price increases [1] Group 1: Q2 Performance - A majority of retail companies exceeded expectations in same-store sales, gross margin, and operating margin, with 57% of companies surpassing same-store sales forecasts and 50% exceeding gross and operating margin expectations [1] - Major retailers such as Home Depot (HD.US), Lowe's (LOW.US), Target (TGT.US), and Walmart (WMT.US) reported solid growth [1] Group 2: Guidance and Outlook - Only 36% of companies raised their full-year EPS guidance midpoint, while most chose to maintain or lower their forecasts, indicating management's concerns about inflation transmission, rising tariff costs, and consumer uncertainty [1] - Companies generally believe that the impact of tariffs will become fully apparent in Q4 [1] Group 3: Analyst Ratings - Goldman Sachs maintains a "Buy" rating on BJ's Wholesale Club (BJ.US), Home Depot, Lowe's, and Walmart, citing their strategies and market positions as favorable; Target is rated "Neutral" [1]

[Commonly Used or Defined Terms](index=3&type=section&id=Commonly%20Used%20or%20Defined%20Terms) This section provides definitions for key terms used throughout the financial report [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the nature and inherent risks of forward-looking statements within the document - The document contains forward-looking statements based on current information, assumptions, expectations, and projections about future events, using terms like 'may,' 'will,' 'anticipate,' 'intend,' 'estimate,' 'project,' 'plan,' 'believe,' 'expect,' 'target,' 'potential,' 'commit,' and 'forecast'[11](index=11&type=chunk) - These statements cover various aspects including demand for products/services, net sales growth, comparable sales, competition, strategic initiatives, economic conditions, housing market, credit markets, tariffs, supply chain, labor costs, disruptive events (natural disasters, cybersecurity, geopolitical conflicts), sustainability, share repurchases, earnings, dividends, capital allocation, interest rates, foreign currency, inflation/deflation, debt issuance, litigation, international operations, accounting effects, regulatory changes, store operations, financial outlook, and the impact of acquisitions (GMS, SRS)[12](index=12&type=chunk) - Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties, many beyond the company's control, which could cause actual results to differ materially from expectations. Readers are advised to review risk factors in the 2024 Form 10-K and subsequent SEC filings[13](index=13&type=chunk) [PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the company's comprehensive financial data, including statements, notes, and management's analysis [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited consolidated financial statements, including balance sheets, income, equity, and cash flow, with detailed notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) This section details the company's financial position, presenting assets, liabilities, and stockholders' equity at specific dates | in millions | August 3, 2025 | February 2, 2025 | | :-------------------------- | :------------- | :--------------- | | **Assets** | | | | Cash and cash equivalents | $2,804 | $1,659 | | Receivables, net | $5,878 | $4,903 | | Merchandise inventories | $24,843 | $23,451 | | Total current assets | $35,391 | $31,683 | | Net property and equipment | $26,896 | $26,702 | | Goodwill | $19,619 | $19,475 | | Total assets | $100,049 | $96,119 | | **Liabilities** | | | | Short-term debt | $— | $316 | | Accounts payable | $13,086 | $11,938 | | Total current liabilities | $30,846 | $28,661 | | Long-term debt | $45,917 | $48,485 | | Total liabilities | $89,384 | $89,479 | | **Stockholders' Equity** | | | | Total stockholders' equity | $10,665 | $6,640 | - Total assets increased by **$3,930 million (4.1%)** from February 2, 2025, to August 3, 2025, primarily driven by increases in cash and cash equivalents, receivables, and merchandise inventories[17](index=17&type=chunk) - Total stockholders' equity increased significantly by **$4,025 million (60.6%)** from February 2, 2025, to August 3, 2025[17](index=17&type=chunk) [Consolidated Statements of Earnings](index=6&type=section&id=Consolidated%20Statements%20of%20Earnings) This section outlines the company's financial performance over periods, including net sales, gross profit, and net earnings | in millions, except per share data | Three Months Ended August 3, 2025 | Three Months Ended July 28, 2024 | Six Months Ended August 3, 2025 | Six Months Ended July 28, 2024 | | :--------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------ | :----------------------------- | | Net sales | $45,277 | $43,175 | $85,133 | $79,593 | | Gross profit | $15,125 | $14,416 | $28,584 | $26,849 | | Operating income | $6,555 | $6,534 | $11,688 | $11,613 | | Net earnings | $4,551 | $4,561 | $7,984 | $8,161 | | Diluted earnings per share | $4.58 | $4.60 | $8.03 | $8.23 | - Net sales for the three months ended August 3, 2025, increased by **$2,102 million (4.9%)** compared to the same period in the prior year[20](index=20&type=chunk) - Diluted EPS decreased slightly by **$0.02 (0.4%)** for the three months ended August 3, 2025, and by **$0.20 (2.4%)** for the six months ended August 3, 2025, compared to the respective prior-year periods[20](index=20&type=chunk) [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents net earnings and other comprehensive income components, reflecting total non-owner changes in equity | in millions | Three Months Ended August 3, 2025 | Three Months Ended July 28, 2024 | Six Months Ended August 3, 2025 | Six Months Ended July 28, 2024 | | :-------------------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------ | :----------------------------- | | Net earnings | $4,551 | $4,561 | $7,984 | $8,161 | | Foreign currency translation adjustments | $167 | $(249) | $289 | $(259) | | Cash flow hedges | $1 | $(60) | $5 | $(51) | | Total other comprehensive income (loss) | $168 | $(309) | $294 | $(310) | | Comprehensive income | $4,719 | $4,252 | $8,278 | $7,851 | - Comprehensive income increased by **$467 million (11.0%)** for the three months ended August 3, 2025, and by **$427 million (5.4%)** for the six months ended August 3, 2025, primarily due to positive foreign currency translation adjustments compared to losses in the prior year[22](index=22&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in stockholders' equity, including common stock, retained earnings, and treasury stock | in millions | August 3, 2025 | July 28, 2024 | | :-------------------------------- | :------------- | :------------ | | Common Stock: | | | | Balance at end of period | $90 | $90 | | Paid-in Capital: | | | | Balance at end of period | $14,438 | $13,731 | | Retained Earnings: | | | | Balance at end of period | $92,943 | $87,357 | | Accumulated Other Comprehensive Loss: | | | | Balance at end of period | $(835) | $(787) | | Treasury Stock: | | | | Balance at end of period | $(95,971) | $(95,971) | | Total stockholders' equity | $10,665 | $4,420 | - Total stockholders' equity significantly increased to **$10,665 million** as of August 3, 2025, from **$4,420 million** as of July 28, 2024, driven by an increase in retained earnings and paid-in capital[25](index=25&type=chunk) - Cash dividends paid for the six months ended August 3, 2025, totaled **$4,574 million**, an increase from **$4,460 million** in the prior year[25](index=25&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section reports cash inflows and outflows from operating, investing, and financing activities over periods | in millions | Six Months Ended August 3, 2025 | Six Months Ended July 28, 2024 | | :---------------------------------------- | :------------------------------ | :----------------------------- | | Net cash provided by operating activities | $8,968 | $10,906 | | Net cash used in investing activities | $(1,892) | $(19,098) | | Net cash (used in) provided by financing activities | $(5,980) | $6,113 | | Change in cash and cash equivalents | $1,096 | $(2,079) | | Cash and cash equivalents at end of period | $2,804 | $1,613 | - Net cash provided by operating activities decreased by **$1,938 million (17.8%)** in the first six months of fiscal 2025 compared to the prior year, primarily due to changes in working capital[28](index=28&type=chunk)[140](index=140&type=chunk) - Net cash used in investing activities significantly decreased by **$17,206 million (90.1%)** in the first six months of fiscal 2025, mainly due to lower payments for business acquisitions compared to the SRS acquisition in fiscal 2024[28](index=28&type=chunk)[141](index=141&type=chunk) - The company shifted from net cash provided by financing activities in the prior year to net cash used in financing activities in the first six months of fiscal 2025, reflecting cash dividends paid and debt repayments, contrasting with prior year's debt issuances for acquisitions[28](index=28&type=chunk)[142](index=142&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [Note 1. Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in accordance with Form 10-Q and GAAP, with no significant changes to accounting policies during the six months ended August 3, 2025[30](index=30&type=chunk) | in millions | August 3, 2025 | February 2, 2025 | | :---------------- | :------------- | :--------------- | | Card receivables | $1,287 | $1,019 | | Rebate receivables| $1,485 | $1,404 | | Customer receivables| $2,521 | $1,896 | | Other receivables | $585 | $584 | | Receivables, net | $5,878 | $4,903 | - The company operates a supplier finance program with outstanding payment obligations of **$598 million** at both August 3, 2025, and February 2, 2025, recorded within accounts payable[32](index=32&type=chunk) - The recently signed One Big Beautiful Bill Act (OBBBA) is not expected to materially impact the estimated fiscal 2025 effective tax rate but is anticipated to reduce fiscal 2025 cash tax payments[33](index=33&type=chunk) [Note 2. Segment Reporting and Net Sales](index=11&type=section&id=Note%202.%20Segment%20Reporting%20and%20Net%20Sales) This note details the company's operating segments and provides a breakdown of net sales by segment and geography - The company operates a 'Primary segment' encompassing retail operations in the U.S., Canada, and Mexico, selling building materials, home improvement, lawn and garden, décor, and facilities maintenance products, along with installation and rental services[37](index=37&type=chunk) - The 'Other' segment includes results from SRS Distribution Inc., acquired in June 2024, which is a specialty trade distribution company for roofers, landscapers, and pool contractors, with roofing and related products accounting for approximately **62-65%** of its net sales[38](index=38&type=chunk)[39](index=39&type=chunk) | in millions | Three Months Ended August 3, 2025 | Three Months Ended July 28, 2024 | Six Months Ended August 3, 2025 | Six Months Ended July 28, 2024 | | :-------------------------- | :-------------------------------- | :------------------------------- | :------------------------------ | :----------------------------- | | Primary segment net sales | $42,157 | $41,901 | $79,444 | $78,319 | | Other net sales | $3,120 | $1,274 | $5,689 | $1,274 | | Consolidated Net sales | $45,277 | $43,175 | $85,133 | $79,593 | | Primary segment operating income | $6,354 | $6,462 | $11,400 | $11,541 | | Other operating income | $201 | $72 | $288 | $72 | | in millions | Three Months Ended August 3, 2025 | Three Months Ended July 28, 2024 | Six Months Ended August 3, 2025 | Six Months Ended July 28, 2024 | | :-------------------------- | :-------------------------------- | :------------------------------- | :------------------------------ | :----------------------------- | | Net sales – in the U.S. | $41,729 | $39,513 | $78,953 | $73,082 | | Net sales – outside the U.S.| $3,548 | $3,662 | $6,180 | $6,511 | | Net sales – products | $43,725 | $41,605 | $82,237 | $76,683 | | Net sales – services | $1,552 | $1,570 | $2,896 | $2,910 | - Deferred revenue for products and services was **$1.6 billion** as of August 3, 2025, and for unredeemed gift cards was **$1.0 billion**[46](index=46&type=chunk)[47](index=47&type=chunk) [Note 3. Property and Leases](index=14&type=section&id=Note%203.%20Property%20and%20Leases) This note provides information on the company's property, plant, equipment, and lease assets and liabilities - Net property and equipment included accumulated depreciation and finance lease amortization of **$30.6 billion** as of August 3, 2025, up from **$29.1 billion** as of February 2, 2025[49](index=49&type=chunk) | in millions | August 3, 2025 | February 2, 2025 | | :------------------------------ | :------------- | :--------------- | | Operating lease right-of-use assets | $8,662 | $8,592 | | Finance lease assets | $2,632 | $2,638 | | Total lease assets | $11,294 | $11,230 | | Current operating lease liabilities | $1,336 | $1,274 | | Long-term operating lease liabilities | $7,668 | $7,633 | | Total lease liabilities | $12,018 | $11,928 | - Lease assets obtained in exchange for new operating lease liabilities were **$793 million** for the six months ended August 3, 2025, an increase from **$670 million** in the prior year[51](index=51&type=chunk) [Note 4. Goodwill and Intangible Assets](index=14&type=section&id=Note%204.%20Goodwill%20and%20Intangible%20Assets) This note details the carrying amounts and changes in goodwill and other intangible assets | in millions | Primary Segment | Other | Consolidated | | :------------------------------ | :-------------- | :---- | :----------- | | Goodwill, balance at February 2, 2025 | $8,450 | $11,025 | $19,475 | | Acquisitions | $62 | $64 | $126 | | Other | $20 | $(2) | $18 | | Goodwill, balance at August 3, 2025 | $8,532 | $11,087 | $19,619 | - Consolidated goodwill increased by **$144 million** to **$19,619 million** as of August 3, 2025, primarily due to immaterial acquisitions and foreign currency translation[52](index=52&type=chunk)[53](index=53&type=chunk) | in millions | August 3, 2025 Net Carrying Amount | February 2, 2025 Net Carrying Amount | | :------------------------------ | :--------------------------------- | :----------------------------------- | | Customer relationships | $7,635 | $7,810 | | Trade names (definite-lived) | $486 | $524 | | Trade names (indefinite-lived) | $649 | $649 | | Total Intangible Assets | $8,770 | $8,983 | - Intangible asset amortization expense was **$139 million** for Q2 fiscal 2025 (up from **$90 million** in Q2 fiscal 2024) and **$278 million** for the first six months of fiscal 2025 (up from **$142 million** in the prior year), reflecting increased amortization related to SRS[55](index=55&type=chunk) [Note 5. Debt and Derivative Instruments](index=15&type=section&id=Note%205.%20Debt%20and%20Derivative%20Instruments) This note describes the company's debt obligations and the use of derivative instruments for risk management - The commercial paper program was increased by **$4.0 billion** to **$11.0 billion** in July 2025, supported by **$11.0 billion** in back-up credit facilities, in connection with the anticipated GMS acquisition[59](index=59&type=chunk) - As of August 3, 2025, there were no outstanding borrowings under the commercial paper program or back-up credit facilities, compared to **$316 million** outstanding at February 2, 2025[60](index=60&type=chunk) - The company repaid **$1.0 billion** in senior notes in April 2025[61](index=61&type=chunk) - Interest rate swap agreements with a notional amount of **$5.4 billion** are used as fair value hedges, with fair values totaling **$599 million** at August 3, 2025[63](index=63&type=chunk) [Note 6. Stockholders' Equity](index=16&type=section&id=Note%206.%20Stockholders'%20Equity) This note provides details on the components of stockholders' equity, including share repurchases and dividends | Metric | August 3, 2025 | July 28, 2024 | | :-------------------------- | :------------- | :------------ | | Shares outstanding (millions) | 995 | 993 | | Cash dividends per share ($) | $2.30 | $2.25 | - The Board of Directors approved a **$15.0 billion** share repurchase authorization in August 2023, with approximately **$11.7 billion** remaining available as of August 3, 2025[67](index=67&type=chunk) - Share repurchases were paused in March 2024 and have not resumed as of August 3, 2025[67](index=67&type=chunk) [Note 7. Fair Value Measurements](index=17&type=section&id=Note%207.%20Fair%20Value%20Measurements) This note explains the methodologies and inputs used for fair value measurements of financial instruments - Assets and liabilities measured at fair value on a recurring basis primarily include derivative agreements, which are valued using Level 2 inputs (interest rate forward curves and discount rates)[69](index=69&type=chunk) | in millions | August 3, 2025 Fair Value (Level 2) | February 2, 2025 Fair Value (Level 2) | | :------------------------------ | :---------------------------------- | :------------------------------------ | | Derivative agreements – assets | $— | $— | | Derivative agreements – liabilities | $(601) | $(795) | - The fair value of senior notes was **$46,296 million (Level 1)** compared to a carrying value of **$48,949 million** as of August 3, 2025[71](index=71&type=chunk) [Note 8. Weighted Average Common Shares](index=18&type=section&id=Note%208.%20Weighted%20Average%20Common%20Shares) This note presents the calculation of basic and diluted weighted average common shares outstanding | in millions | Three Months Ended August 3, 2025 | Three Months Ended July 28, 2024 | Six Months Ended August 3, 2025 | Six Months Ended July 28, 2024 | | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------ | :----------------------------- | | Basic weighted average common shares | 992 | 990 | 992 | 989 | | Diluted weighted average common shares | 994 | 992 | 994 | 992 | | Anti-dilutive securities excluded | 1 | 1 | 1 | 1 | [Note 9. Contingencies](index=18&type=section&id=Note%209.%20Contingencies) This note discusses potential future obligations arising from litigation or other uncertain events - Management believes that any litigation arising in the normal course of business is not expected to have a material adverse effect on the company's consolidated financial condition, results of operations, or cash flows[74](index=74&type=chunk) [Note 10. Acquisitions](index=18&type=section&id=Note%2010.%20Acquisitions) This note provides details on recent business acquisitions, including SRS Distribution Inc. and the pending GMS Inc. acquisition - The acquisition of SRS Distribution Inc. for **$18.0 billion** was completed on June 18, 2024, funded by commercial paper borrowings, long-term debt, and cash on hand. The purchase price allocation was finalized in Q1 fiscal 2025[75](index=75&type=chunk) - The company entered into a definitive agreement on June 29, 2025, to acquire GMS Inc. for an expected total equity value of approximately **$4.3 billion** (total enterprise value of **$5.5 billion**), with closing anticipated in the second half of fiscal 2025, funded by cash on hand and commercial paper borrowings[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section provides management's perspective on financial condition and operating results, covering performance analysis, liquidity, and critical accounting estimates [Executive Summary](index=19&type=section&id=Executive%20Summary) This summary highlights key financial performance metrics, strategic initiatives, and operational updates for the period | Metric | Q2 Fiscal 2025 | First Six Months Fiscal 2025 | | :---------------------- | :------------- | :--------------------------- | | Net sales (billions) | $45.3 | $85.1 | | Net earnings (billions) | $4.6 | $8.0 | | Diluted EPS ($) | $4.58 | $8.03 | - Three new stores were opened in the U.S. during Q2 fiscal 2025, bringing the total store count to **2,353**[83](index=83&type=chunk) - Cash flow from operations for the first six months of fiscal 2025 was **$9.0 billion**, used to fund **$4.6 billion** in dividends and **$1.7 billion** in capital expenditures[84](index=84&type=chunk) - Return on Invested Capital (ROIC) decreased to **27.2%** at the end of Q2 fiscal 2025 from **31.9%** in Q2 fiscal 2024, primarily due to higher average long-term debt and equity from the SRS acquisition financing[85](index=85&type=chunk) - The pending acquisition of GMS for an expected total enterprise value of approximately **$5.5 billion** is expected to close in the second half of fiscal 2025[86](index=86&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance for the reported periods [Fiscal 2025 and Fiscal 2024 Three Month Comparisons](index=20&type=section&id=FISCAL%202025%20AND%20FISCAL%202024%20THREE%20MONTH%20COMPARISONS) This section compares the company's financial and operational performance for the three-month periods of fiscal 2025 and 2024 | dollars in millions | August 3, 2025 | % of Net Sales | July 28, 2024 | % of Net Sales | | :------------------------ | :------------- | :------------- | :------------ | :------------- | | Net sales | $45,277 | | $43,175 | | | Gross profit | $15,125 | 33.4 % | $14,416 | 33.4 % | | Selling, general and administrative | $7,764 | 17.1 % | $7,144 | 16.5 % | | Depreciation and amortization | $806 | 1.8 % | $738 | 1.7 % | | Operating income | $6,555 | 14.5 % | $6,534 | 15.1 % | | Net earnings | $4,551 | 10.1 % | $4,561 | 10.6 % | | Selected financial and sales data | August 3, 2025 | July 28, 2024 | % Change | | :-------------------------------- | :------------- | :------------ | :------- | | Comparable sales (%) | 1.0 | (3.3) | N/A | | Comparable customer transactions (%) | (0.4) | (2.2) | N/A | | Comparable average ticket (%) | 1.4 | (1.3) | N/A | | Diluted earnings per share ($) | $4.58 | $4.60 | (0.4) | - Net sales increased by **4.9%** to **$45.3 billion**, primarily driven by the SRS acquisition (**$1.8 billion** incremental sales) and positive comparable sales, partially offset by a calendar shift[95](index=95&type=chunk) - Online sales grew by **10.1%** (**11.5%** on a comparable week basis) and represented **15.6%** of net sales[96](index=96&type=chunk) - Comparable sales increased by **1.0%**, reflecting a **1.4%** increase in comparable average ticket and a **0.4%** decrease in comparable customer transactions. This was influenced by smaller home improvement projects and macroeconomic uncertainties[98](index=98&type=chunk) - Gross profit margin remained flat at **33.4%**, benefiting from shrink and supply chain efficiencies, offset by the inclusion of SRS[100](index=100&type=chunk) - SG&A as a percentage of net sales increased to **17.1%** from **16.5%**, mainly due to higher payroll and related costs[102](index=102&type=chunk) - Depreciation and amortization as a percentage of net sales increased to **1.8%** from **1.7%**, primarily due to increased intangible asset amortization from SRS[103](index=103&type=chunk) [Fiscal 2025 and Fiscal 2024 Six Month Comparisons](index=22&type=section&id=FISCAL%202025%20AND%20FISCAL%202024%20SIX%20MONTH%20COMPARISONS) This section compares the company's financial and operational performance for the six-month periods of fiscal 2025 and 2024 | dollars in millions | August 3, 2025 | % of Net Sales | July 28, 2024 | % of Net Sales | | :------------------------ | :------------- | :------------- | :------------ | :------------- | | Net sales | $85,133 | | $79,593 | | | Gross profit | $28,584 | 33.6 % | $26,849 | 33.7 % | | Selling, general and administrative | $15,294 | 18.0 % | $13,811 | 17.4 % | | Depreciation and amortization | $1,602 | 1.9 % | $1,425 | 1.8 % | | Operating income | $11,688 | 13.7 % | $11,613 | 14.6 % | | Net earnings | $7,984 | 9.4 % | $8,161 | 10.3 % | | Selected financial and sales data | August 3, 2025 | July 28, 2024 | % Change | | :-------------------------------- | :------------- | :------------ | :------- | | Comparable sales (%) | 0.4 | (3.1) | N/A | | Comparable customer transactions (%) | (0.5) | (1.9) | N/A | | Comparable average ticket (%) | 0.7 | (1.3) | N/A | | Diluted earnings per share ($) | $8.03 | $8.23 | (2.4) | - Net sales increased by **7.0%** to **$85.1 billion**, primarily due to **$4.4 billion** incremental net sales from SRS and positive comparable sales, also influenced by a calendar shift[111](index=111&type=chunk) - Online sales increased by **10.5%** (**10.0%** on a comparable week basis) and represented **15.6%** of net sales[112](index=112&type=chunk) - Comparable sales increased by **0.4%**, driven by a **0.7%** increase in comparable average ticket, offset by a **0.5%** decrease in comparable customer transactions, reflecting ongoing macroeconomic uncertainties[113](index=113&type=chunk) - Gross profit margin slightly decreased to **33.6%** from **33.7%**, reflecting the inclusion of SRS, partially offset by shrink and supply chain efficiencies[115](index=115&type=chunk) - SG&A as a percentage of net sales increased to **18.0%** from **17.4%**, mainly due to higher payroll costs and the absence of a non-recurring legal benefit recognized in the prior year[117](index=117&type=chunk) - Diluted EPS decreased by **2.4%** to **$8.03**, primarily due to lower net earnings[121](index=121&type=chunk) [Non-GAAP Financial Measures](index=24&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) This section presents and reconciles non-GAAP financial measures, such as Return on Invested Capital, used by management - Return on Invested Capital (ROIC) is a non-GAAP measure used to assess capital deployment effectiveness, defined as Net Operating Profit After Tax (NOPAT) divided by average debt and equity[123](index=123&type=chunk) | Metric (millions) | Twelve Months Ended August 3, 2025 | Twelve Months Ended July 28, 2024 | | :------------------ | :--------------------------------- | :-------------------------------- | | Net earnings | $14,629 | $14,772 | | Operating income | $21,601 | $21,162 | | NOPAT | $16,412 | $16,118 | | Average debt and equity | $60,305 | $50,534 | | ROIC (%) | 27.2 | 31.9 | - ROIC decreased to **27.2%** for the trailing twelve-month period ended August 3, 2025, from **31.9%** in the prior year, primarily due to higher average debt and equity from the SRS acquisition financing[124](index=124&type=chunk)[85](index=85&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, funding sources, capital allocation, and debt management strategies - As of August 3, 2025, the company had **$2.8 billion** in cash and cash equivalents, with **$1.1 billion** held by foreign subsidiaries[127](index=127&type=chunk) - The company expects current cash, operating cash flow, commercial paper program, and access to debt markets to be sufficient for operating requirements, debt payments, contractual obligations, business investments, dividends, and share repurchases[127](index=127&type=chunk) - Share repurchases were paused in March 2024 due to the SRS acquisition and are not planned to resume in fiscal 2025[128](index=128&type=chunk) - Capital expenditures for the first six months of fiscal 2025 were approximately **$1.7 billion**, with a full fiscal 2025 target of approximately **$4 billion (2.5% of net sales)** for customer experience improvements, Pro customer capabilities, and new stores[130](index=130&type=chunk) - The quarterly cash dividend was increased by **2.2%** to **$2.30 per share** in February 2025, with **$4.6 billion** paid in dividends during the first six months of fiscal 2025[131](index=131&type=chunk) - Net cash provided by operating activities decreased by **$1.9 billion** in the first six months of fiscal 2025, primarily due to increased inventory levels and deferred tax payments[140](index=140&type=chunk) - Net cash used in investing activities decreased by **$17.2 billion**, mainly due to the prior year's SRS acquisition[141](index=141&type=chunk) - Net cash used in financing activities for the first six months of fiscal 2025 reflected **$4.6 billion** in dividends and **$1.2 billion** in long-term debt repayments, contrasting with prior year's debt proceeds for the SRS acquisition[142](index=142&type=chunk) [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) This section identifies and explains accounting estimates that require significant judgment and could impact financial results - There were no changes to critical accounting estimates or significant accounting policies during the first six months of fiscal 2025[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) This section details the company's exposure to market risks, including interest rate and foreign currency fluctuations, noting no material changes - The company's primary market risks stem from interest rate fluctuations on its long-term debt portfolio and foreign currency exchange rate fluctuations affecting foreign operations and product purchases[146](index=146&type=chunk) - There have been no material changes to the company's market risks during the first six months of fiscal 2025 compared to those disclosed in the 2024 Form 10-K[146](index=146&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures.) This section confirms the effectiveness of disclosure controls and procedures while noting ongoing modifications to internal control processes - The company's disclosure controls and procedures were evaluated and deemed effective as of August 3, 2025[147](index=147&type=chunk) - An ongoing business transformation initiative involves upgrading and migrating accounting and finance systems, leading to modifications in internal control processes[148](index=148&type=chunk) - No other material changes to internal control over financial reporting occurred during the fiscal quarter ended August 3, 2025[149](index=149&type=chunk) [PART II – OTHER INFORMATION](index=28&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, and other relevant corporate information [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings.) This section updates on legal proceedings, noting the final payment of penalties under a civil consent decree and no other material changes - No material changes occurred during the first six months of fiscal 2025 to the legal proceedings disclosure in the 2024 Form 10-K[151](index=151&type=chunk) - The company made the final payment of approximately **$1.7 million** in stipulated penalties under a civil consent decree with the U.S. Department of Justice and EPA related to lead-safe work practices, and is working to terminate the decree[153](index=153&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors.) This section refers to the comprehensive risk factors outlined in the 2024 Form 10-K, confirming no material changes - Readers should carefully consider the risk factors outlined in Part I, Item 1A. 'Risk Factors' of the 2024 Form 10-K, as these could materially and adversely affect the business[154](index=154&type=chunk) - There have been no material changes in the risk factors discussed in the 2024 Form 10-K[154](index=154&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=28&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) This section details issuer purchases of equity securities, including deemed repurchases for employee stock plans and unregistered sales of deferred stock units | Period | Total Number of Shares Purchased | Average Price Paid Per Share ($) | | :-------------------------- | :------------------------------- | :--------------------------- | | May 5, 2025 – June 1, 2025 | 5,554 | $369.41 | | June 2, 2025 – June 29, 2025| 2,823 | $364.80 | | June 30, 2025 – August 3, 2025| 2,528 | $369.18 | | Total | 10,905 | $368.17 | - These share purchases reflect deemed repurchases under the Omnibus Stock Incentive Plan for tax withholding and exercise price payments, not publicly announced share repurchase programs[156](index=156&type=chunk)[157](index=157&type=chunk) - Approximately **$11.7 billion** remained available under the **$15.0 billion** share repurchase authorization as of August 3, 2025, but repurchases have been paused since March 2024[157](index=157&type=chunk) - The company issued **2,353** deferred stock units to non-employee directors and credited **915** deferred stock units under Restoration Plans during Q2 fiscal 2025, both pursuant to exemptions from registration[159](index=159&type=chunk)[160](index=160&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information.) This section confirms no director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended August 3, 2025[161](index=161&type=chunk) [Item 6. Exhibits](index=29&type=section&id=Item%206.%20Exhibits.) This section lists all exhibits filed with the Form 10-Q, including merger agreements, corporate documents, and certifications - Exhibits include the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation, By-Laws, certifications from executive officers (pursuant to Rule 13a-14(a) and Section 906 of Sarbanes-Oxley Act), and various XBRL taxonomy extension documents[163](index=163&type=chunk) [SIGNATURES](index=30&type=section&id=SIGNATURES) This section provides the official signatures of the company's executive officers, certifying the report's accuracy - The report is signed by Edward P. Decker (Chair, President and Chief Executive Officer), Richard V. McPhail (Executive Vice President and Chief Financial Officer), and Kimberly R. Scardino (Senior Vice President – Finance, Chief Accounting Officer and Controller) on August 25, 2025[166](index=166&type=chunk)

Core Insights - Home Depot, Inc. reported second-quarter fiscal 2025 results showing stable earnings per share but ongoing margin pressure, with EPS at $4.58, slightly down from $4.60 a year ago [1][8] - The company reaffirmed its fiscal 2025 guidance, expecting a gross margin of approximately 33.4% and a decline in adjusted earnings per share by about 2% from $15.24 in fiscal 2024 [4][8] Financial Performance - The second-quarter gross margin was 33.4%, a slight improvement from the previous year, but the operating margin decreased to 14.5% from 15.1% in the same quarter of fiscal 2024 [2][8] - Operating expenses increased by 65 basis points as a percentage of sales, reaching 18.9%, with SG&A expenses climbing 8.7%, outpacing sales growth of 4.9% [3][4] Competitor Analysis - Lowe's Companies, Inc. reported a 5.6% increase in adjusted EPS to $4.33, with an adjusted gross margin of 33.8% and an adjusted operating margin of 14.7%, indicating effective cost management [5] - Floor & Decor Holdings, Inc. saw an 11.5% increase in earnings to 58 cents per share, managing gross margin and profitability despite external pressures [6] Market Position - Home Depot shares have increased by 10.4% over the past year, outperforming the industry growth of 7.4% [7] - The company trades at a forward price-to-earnings ratio of 26.16, higher than the industry average of 23.50, and carries a Value Score of D [9] Sales and Earnings Estimates - The Zacks Consensus Estimate for Home Depot's current financial-year sales implies a year-over-year growth of 2.9%, while earnings per share are expected to decline by 1.4% [10]