The Home Depot reported a modest sales uplift in the first quarter of FY26, which was in line with the lackluster home improvement market, according to an analyst.
The company’s sales for the quarter ended May 3 were $41.8 billion, up 4.8 per cent year-on-year.
While the overall numbers are solid, comparable sales grew only 0.6 per cent (up 0.4 per cent in the US), which, according to GlobalData MD Neil Saunders, was more reflective of the state of the core business.
“There is nothing particularly spectacular about the latest results. But then, nor is there anything particularly shocking,” Saunders said. “The numbers are an accurate reflection of a home improvement market that still lacks the power to move forward at anything but a glacial pace.”
The analyst said several factors were suppressing results, foremost among which was the continued weakness in the housing market.
“Housing transactions were down by 0.5 per cent during the quarter. This isn’t as bad as some periods, but still means that the demand for improvement and home products that is powered by moving house is still largely absent. Unfortunately, the recent spike in inflation will make it harder to cut rates, which are the key to unlocking the housing sector,” he elaborated.
Sharp price increases are also weighing on consumer confidence, which dampens demand for bigger-ticket items, Saunders continued.
“Big consumer improvement projects undertaken fell by 2.7 per cent over the prior year, with smaller projects declining by a shallower 1.4 per cent. Fortunately, within the core business, professional demand has been somewhat better, which has allowed Home Depot to produce modestly positive numbers,” he said.
Saunders noted that none of these is a Home Depot issue, as the home improvement market remains soft and unlikely to reverse anytime soon.
“The medium-term battle is to steal market share from rivals,” he said. “In the pro segment, Home Depot looks comfortable, and it remains the clear destination of choice for most tradespeople.
“In the consumer market, Home Depot’s lead is huge. However, that poses a challenge as it makes further gains very tough and means there is a lot of ground to defend.”
On the bottom line, first-quarter net earnings decreased from $3.4 billion to $3.3 billion.
The company continues to expect sales growth of approximately 2.5-4.5 per cent and comparable sales growth of approximately flat to 2 per cent for the full year.
“Overall, Home Depot is a well-run business that has impressive dominance in its sector. It has been right to pivot to the professional side of the market as this is where the opportunities currently lie,” Saunders said.
“However, it must also ensure it stays up to par on the consumer side – and that means improving small things and making marginal gains now, as these will translate into bigger benefits as the market recovers,” he added.
Last year, Home Depot’s sales increased 3.2 per cent to $164.7 billion, with comparable sales up 0.3 per cent. Net earnings were down from $14.8 billion to $14.2 billion.
