Home Depot Q1 sales $41.8B, comps +0.6%, underlying demand flat vs 2025. Tariff and fuel risks loom. Q2 weather and storm activity are swing factors.
Home Depot (NYSE: HD) reported first-quarter fiscal 2026 sales of $41.8 billion, a 4.8% increase year-over-year, with comparable sales rising 0.6% overall and 0.4% in the US. Adjusted diluted earnings per share came in at $3.43, down from $3.56 a year ago. The company reaffirmed its full-year guidance: comp sales growth between flat and 2%, total sales growth of 2.5% to 4.5%, and adjusted diluted EPS flat to up 4%.
The print was in line with the company's own expectations. Management described underlying demand as "relatively similar" to what it saw throughout fiscal 2025. That is the core risk for anyone holding or watching HD: after a year of flat-to-modest growth, the first quarter delivered no acceleration. The macro headwinds that suppressed large-project spending in 2025 – high interest rates, low housing turnover, consumer uncertainty – remain in place. New pressures are building: tariffs, rising fuel costs, and a volatile weather pattern that could disrupt the spring-summer selling season.
Management's repeated phrase – "underlying demand was relatively similar" – is the most important signal in the call. After a year of waiting for a recovery in home improvement spending, the first quarter offered no evidence of a turn. Existing home sales remain stuck around 4 million annualized. HELOC growth has plateaued. Housing affordability is still compressed by elevated mortgage rates.
HD's core customer – a homeowner with equity and a healthy balance sheet – is engaging in good shape by most measures. That customer is deferring large, discretionary projects. Management described the pattern as "muted" for cross-category, big-ticket baskets. That drag is structural until either rates fall or housing turnover picks up. Neither appears imminent.
Weather was a net negative in Q1, with 56 basis points of storm-related headwind. That will dissipate through the year, the pattern is unpredictable. April's late-month softness was weather-driven, and May has returned to the engagement levels seen in February and March. The risk is that an active hurricane season or prolonged wet spring could suppress the outdoor project categories that drove Q1 strength.
Total sales growth of 4.8% was driven largely by the acquisition of GMS, which added about 75 basis points of gross margin pressure. Organic growth was modest. US comps were positive 0.4% for the quarter, with a notable intra-quarter pattern: February +0.4%, March +2%, April -0.8%. The April dip reflected unfavorable weather comparisons in the final two weeks, particularly in northern regions where precipitation delayed outdoor projects.
| Metric | Q1 2026 | Q1 2025 | Change |
|---|---|---|---|
| Total Sales | $41.8B | $39.9B | +4.8% |
| Comp Sales (total) | +0.6% | -2.8% | +340 bps |
| US Comp Sales | +0.4% | 2.5% | +290 bps |
| Gross Margin | 33.0% | 33.75% | 75 bps |
| Operating Margin | 11.9% | 12.9% | 100 bps |
| Adjusted Diluted EPS | $3.43 | $3.56 | 3.7% |
Pro customers posted positive comps and outperformed DIY for the quarter. Management highlighted that the highest-comping part of the pro business was the "complex purchase occasion" – larger, multi-category orders that require delivery, trade credit, or a field sales force. That segment is the focus of HD's strategic investments in SRS, GMS, and the newly acquired Mingledorf HVAC distribution platform.
DIY was mixed. Nine of 16 merchandising departments posted positive comps, including storage, power, hardware, plumbing, electrical, bath, indoor garden, paint, and kitchens. Big-ticket transactions (over $1,000) were positive 0.8%, management noted that "larger discretionary projects remain under pressure." The average ticket rose 2.2%, while transactions fell 1.3% – a sign that customers are spending more per visit making fewer trips.
Gross margin was 33.0%, down about 75 basis points from Q1 2025. The vast majority of that decline came from the GMS acquisition, which carries a lower margin profile than HD's core. The remainder reflected price investments in the roofing market at SRS, where the company chose to maintain customer momentum despite a 28% drop in industry shipments in Q4 2025. Operating margin came in at 11.9%, down from 12.9% a year ago. Adjusted operating margin, excluding intangible amortization, was 12.3% versus 13.2%.
HD's guidance assumes it can manage through the current tariff environment, as it did in fiscal 2025. The landscape has shifted since the company issued its initial outlook three months ago. New tariffs have been introduced. Fuel prices are higher. Management acknowledged that "costs on the horizon have at least moved towards a bias towards an increase."
Gross margin for the full year is expected to be about 33.1%. The Q1 miss relative to that target was within expectations, the path to the full-year number requires improvement. Management guided that Q2 will still show year-over-year pressure, though less than Q1, and that Q3 and Q4 will be roughly flat. That trajectory depends on stable input costs and no further tariff escalation.
HD has filed for tariff refunds on goods imported before certain tariff changes. The company has received an "immaterial" amount so far expects that could provide a "significant offset" later in the year. That is a known unknown. If refunds materialize in Q3 or Q4, they could cushion margins. If they are delayed or denied, the pressure on operating margins increases.
The second quarter is HD's largest selling period. Management expressed confidence in store readiness, product assortment, and the merchandising execution team's ability to drive spring events. The early May data point – engagement similar to February and March – is encouraging covers only two weeks.
Last year, the back half of the year saw historically low hail and hurricane activity, which pressured SRS's roofing business. If storm activity returns to normal levels in 2026, that alone could add to comps in the second half. Management explicitly cited "a return to normal storm activity" as a driver of the higher second-half component in guidance. That is a binary risk: normal storms help; another quiet season hurts.
HD expects SRS to deliver mid-single-digit organic sales growth for the full year. In Q1, SRS generated $4 billion in sales with slightly negative comps, driven by low single-digit declines in roofing. The company believes SRS took significant market share despite the industry headwinds. If the roofing market stabilizes and storm activity normalizes, SRS should hit its target. If not, the organic growth assumption is at risk.
HD carries an Alpha Score of 34 out of 100, labeled Weak, in the Consumer Discretionary sector. That proprietary metric reflects the combination of the combination of flat demand, margin pressure from acquisitions, and macro uncertainty. The stock's valuation assumes a recovery that has not yet materialized. Any negative surprise on guidance, margins, or second-half demand would likely compress multiples further.
HD's next earnings call in August will cover Q2 results and any update to full-year guidance. Between now and then, the key data points are weekly weather patterns, monthly housing data, and any tariff or fuel policy changes. The company has proven it can manage through a soft environment and take share. The risk skew is to the downside until demand shows a genuine acceleration, not just stabilization.
For traders, the setup is a hold or reduce position until there is evidence that the flat demand regime is ending. The Alpha Score of 34 reinforces that caution. The guidance is intact, the margin of safety is thin.
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