Home Depot has managed to weather the economic storm that has been plaguing the home improvement sector, as spending by professionals continues to buoy the company despite collapsing consumer confidence. Regular consumers are increasingly wary of committing to large home improvement projects, with the ongoing conflict in Iran driving gas prices higher and the housing market remaining dysfunctional.
Professional Buyers Fill the Gap
In an interview with CNBC, Home Depot Chief Financial Officer Richard McPhail explained that the industry is surviving thanks to homeowners who are 'more financially protected' than other buyers. However, McPhail conceded that this group can only support sales 'up to a certain point.' He noted that customers consistently indicate they will defer spending on major projects, a sentiment that has persisted for several years.
With homeowners holding back, Home Depot has leaned on a different customer base: professionals such as contractors and roofers, who now account for up to 50 percent of the company's revenue. This strategic pivot appears to be paying off, as sales have held up well despite tough economic conditions.
First Quarter Earnings Report
Home Depot's solid first-quarter earnings report revealed net income of $3.29 billion for the quarter ending May 3, down from $3.43 billion a year earlier. However, sales climbed nearly 5 percent to $41.77 billion, up from $39.86 billion last year. Despite lingering pressure on consumer spending, Home Depot expects fiscal 2026 sales growth between 2.5 percent and 4.5 percent, ahead of analysts' expectations of roughly 4 percent.
Comparable sales rose just 0.6 percent during the quarter, missing expectations and marking the third consecutive quarter in which the metric moved less than half a percentage point in either direction. Comparable transactions also fell 1.3 percent—the fourth straight quarterly decline—while gross margins came in at 33 percent, below expectations of 33.2 percent.
Strategic Acquisitions to Deepen Professional Reach
To deepen its reach among professional buyers, Home Depot has spent aggressively on acquisitions. In 2024, the company acquired SRS Distribution for more than $18 billion, expanding its footprint in roofing, landscaping, and pool supply distribution. It also purchased GMS, a distributor of specialty building materials. Most recently, SRS completed its acquisition of Mingledorff's, a wholesale HVAC equipment and parts distributor serving residential and commercial customers—a move Home Depot says expands its reach into a market worth an estimated $100 billion.
