Q4 2025 The Home Depot Inc Earnings Call

February 24, 2026

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Speaker #5: Greetings, and welcome to the HOME DEPOT fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.

Operator: Greetings, and welcome to The Home Depot Q4 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

Speaker #5: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.

Speaker #5: It is now my pleasure to introduce your host, Isabel Janci. Please go ahead.

Speaker #6: Thank you, Christine. And good morning, everyone. Welcome to HOME DEPOT's fourth quarter and fiscal year 2025 earnings call. Joining us on our call today are Ted Decker, Chair, President, and CEO; Ann-Marie Campbell, Senior Executive Vice President; Billy Merchandising; and Richard McPhail, Executive Vice President and Chief Financial Officer.

Isabel Janci: Thank you, Christine. Good morning, everyone. Welcome to Home Depot's Q4 and fiscal year 2025 Earnings Call. Joining us on our call today are Ted Decker, Chair, President, and CEO, Ann-Marie Campbell, Senior Executive Vice President, Billy Bastek, Executive Vice President of Merchandising, and Richard McPhail, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to one question with one follow-up. If we are unable to get to your question during the call, please call our investor relations department at 770-384-2387.

Speaker #6: Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to one question with one follow-up.

Speaker #6: If we are unable to get to your question during the call, please call our investor relations department at 770-384-2387. Before I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward-looking statements under the Federal Securities Laws including as defined in the Private Securities Litigation Reform Act of 1995.

Isabel Janci: Before I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward-looking statements under the federal securities laws, including as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release, in our most recent annual report on Form 10-K, and in our other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures, including, but not limited to, adjusted operating margin, adjusted diluted earnings per share, and return on invested capital.

Speaker #6: These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include but are not limited to the factors identified in the release and are most recent annual report on Form 10-K and in our other filings with the Securities and Exchange Commission.

Speaker #6: Today's presentation will also include certain non-GAAP measures including but not limited to adjusted operating margin, adjusted diluted earnings per share, and return on invested capital.

Speaker #6: For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted.

Isabel Janci: For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted.

Speaker #7: Thank you, Isabel. And good morning, everyone. Sales for fiscal 2025 are $164.7 billion, an increase of 3.2% from the same period last year. Comp sales increased 0.3% from the same period last year.

Ted Decker: Thank you, Isabel, and good morning, everyone. Sales for fiscal 2025 were $164.7 billion, an increase of 3.2% from the same period last year. Comp sales increased 0.3% from the same period last year, and comps in the US increased 0.5%. Adjusted diluted earnings per share were $14.69, compared to $15.24 in the prior period. In Q4, comp sales increased 0.4% from last year, and comps in the US were up 0.3%. Adjusted diluted earnings per share were $2.72, compared to $3.13 in the prior year. In the quarter, our regional performance varied, with our Northern and Western division posting positive comps. In local currency, Mexico reported positive comps, and Canada reported negative comps.

Speaker #7: And comps in the US increased 0.5%. Adjusted diluted earnings per share were $14.69. Compared to $15.24 in the prior period. In the fourth quarter, comp sales increased 0.4% from last year.

Speaker #7: And comps in the US were up 0.3%. Adjusted diluted earnings per share were $2.72 compared to $3.13 in the prior year. In the quarter, our regional performance varied with our northern and western division posting positive comps.

Speaker #7: In local currency, Mexico reported positive comps, and Canada reported negative comps. Our fourth quarter results were largely in line with our expectations, reflecting the lack of storm activity in the third quarter and ongoing consumer uncertainty and pressure in housing.

Ted Decker: Our Q4 results were largely in line with our expectations, reflecting the lack of storm activity in Q3 and ongoing consumer uncertainty and pressure in housing. Additionally, storm activity in January provided a sales benefit in the quarter. Adjusting for storms, underlying demand was relatively stable throughout the year. As you'll hear from Billy, we are growing market share by delivering the best value proposition in home improvement. As we shared with you at our Investor and Analyst Conference in December, we are uniquely positioned to grow share of wallet with all our customers. We are investing across the business to drive our core and culture, deliver a frictionless, interconnected experience, and win the Pro. As Anne will detail, our teams did an incredible job staying engaged, focusing on the customer, and elevating the customer experience.

Speaker #7: Additionally, storm activity in January provided a sales benefit in the quarter. Adjusting for storms underlined demand was relatively stable throughout the year. As you'll hear from Billy, we are growing market share by delivering the best value proposition in home improvement.

Speaker #7: As we shared with you at our investor and analyst conference in December, we are uniquely positioned to grow share of wallet with all our customers.

Speaker #7: We are investing across the business to drive our core and culture to deliver a frictionless interconnected experience and win the pro. As Ann will detail, our teams did an incredible job staying engaged, focusing on the customer, and elevating the customer experience.

Speaker #7: In fact, our customers are telling us that are associates continue to deliver exceptional service. In addition, our merchants continue to offer tremendous value as evidenced by record-setting events in the quarter.

Ted Decker: In fact, our customers are telling us that our associates continue to deliver exceptional service. In addition, our merchants continue to offer tremendous value, as evidenced by record-setting events in the quarter. We're also encouraged by the traction we see with the Pro. Pros who are utilizing our Pro ecosystem of capabilities are spending more with us, and we remain focused on enhancing our capabilities, from sales support, to project management, to delivery, all to better support Pros throughout the life of their projects. This year, SRS grew organic sales by a low single-digit percentage and expanded market share, despite pressured industry demand and lack of storms in the back half of the year. This is a testament to their strong value proposition, customer relationships, and consistent execution. In addition to the GMS acquisition, they completed several tuck-in acquisitions and opened a number of greenfield locations across their verticals.

Speaker #7: We're also encouraged by the traction we see with the pro. Pros who are utilizing our pro ecosystem of capabilities are spending more with us.

Speaker #7: And we remain focused on enhancing our capabilities. From sales support to project management to delivery, all to better support pros throughout the life of their projects.

Speaker #7: This year, SRS Group organic sales grew by a low single-digit percentage and expanded market share, despite pressured industry demand and a lack of storms in the back half of the year.

Speaker #7: This is a testament to their strong value proposition, customer relationships, and consistent execution. In addition to the GMS acquisition, they completed several Tucken acquisitions and opened a number of greenfield locations across their verticals.

Speaker #7: Going forward, we will continue to support SRS's momentum and we expect their organic sales to grow mid-single digits in fiscal 2026. Looking ahead to fiscal 2026, we expect total sales growth of approximately $2.5% to $4.5%.

Ted Decker: Going forward, we will continue to support SRS's momentum, and we expect their organic sales to grow mid-single digits in fiscal 2026. Looking ahead to fiscal 2026, we expect total sales growth of approximately 2.5% to 4.5%, comparable sales growth of approximately flat to 2%, and adjusted diluted earnings per share to grow approximately flat to 4%. We remain focused on delivering the best customer experience and value proposition in home improvement. We have a clear growth strategy, and we're investing in our stores, in our interconnected shopping experience, and in the Pro to grow share in any market environment. I want to close by thanking our associates for their hard work and dedication to serving our customers in a dynamic year. With that, let me turn the call over to Anne.

Speaker #7: Comparable sales growth of approximately flat to 2% and adjusted diluted earnings per share to grow approximately flat to 4%. We remain focused on delivering the best customer experience and value proposition in home improvement.

Speaker #7: We have a clear growth strategy and we're investing in our stores, in our interconnected shopping experience, and in the pro to grow share in any market environment.

Speaker #7: I want to close by thanking our associates for their hard work and dedication to serving our customers in a dynamic year. With that, let me turn the call over to Ann.

Speaker #8: Thanks, Ted. And good morning, everyone. First, I want to thank our associates who did a great job serving our customers during the recent winter storm Fern.

Ann-Marie Campbell: Thanks, Ted. Good morning, everyone. First, I want to thank our associates who did a great job serving our customers during the recent Winter Storm Fern that impacted many of our communities we serve, particularly in our Northern and Southern Division. Our priority in situations like these is always the safety of our associates and customers. We activated our emergency response protocols, working with our vendors and merchants teams to deliver essential products to the appropriate stores. This ensured we remained in stock and ready to serve our communities before, during, and after the storm. As always, I'm extremely proud of how our teams showed up for each other and our customers. That commitment continues to be a defining part of who we are as a company. As you heard from us in December, we are focused on the core and culture of our company.

Speaker #8: That impacted many of the communities we serve, particularly in our Northern and Southern divisions. Our priority in situations like these is always the safety of our associates and customers.

Speaker #8: We activated our emergency response protocols, working with our vendors and merchants teams to deliver essential products to the appropriate stores. This ensured we remained in stock and ready to serve our communities before during and after the storm.

Speaker #8: As always, I'm extremely proud of how our team showed up for each other and our customers and that commitment continues to be a defining part of who we are as a company.

Speaker #8: As you heard from us in December, we are focused on the core and culture of our company. Our associates are the key to delivering an exceptional customer experience.

Ann-Marie Campbell: Our associates are the key to delivering an exceptional customer experience. Their passion, knowledge, and expertise are critical to solving customers' problems and fulfilling their dreams. Over the last year, we have talked about how we have enabled tools and processes for our associates to better serve our customers. These changes not only increase associate engagement, but also enhances store performance by driving higher sales, productivity, and efficiency in our operations. We're also improving the customer experience by transitioning tasking to our MET team. Our MET team's core competency is servicing our base and executing merchandising changes in our stores. By transitioning tasking to them, our Orange Apron associates have more time to engage with customers and drive sales. While this transition is not complete, in our pilot stores, we have already seen a meaningful increase in labor productivity.

Speaker #8: Their passion, knowledge, and expertise are critical to solving customers' problems and fulfilling their dreams. Over the last year, we have talked about how we have enabled tools and processes for our associates to better serve our customers.

Speaker #8: These changes not only increase associate engagement but also enhance store performance by driving higher sales productivity and efficiency in our operations. We are also improving the customer experience by transitioning tasking to our MET team.

Speaker #8: Our MET teams' core competency is servicing our base and executing merchandising changes in our stores. By transitioning tasking to them, our orange apron associates have more time to engage with customers and drive sales.

Speaker #8: And while this transition is not complete, in our pilot stores, we have already seen a meaningful increase in labor productivity. Over the years, our business has evolved to meet the needs of our interconnected and pro customers.

Ann-Marie Campbell: Over the years, our business has evolved to meet the needs of our interconnected and pro customers. As you know, over 50% of our online orders are fulfilled through our stores. Ensuring that our orders are picked, staged, and delivered in a reliable and repeatable fashion is critical to providing a frictionless customer experience, regardless of the type of fulfillment, whether picked up in store or delivered the same day to a home or job site. As a result, we have realigned certain positions in our stores to better drive the outcomes we desire. We now have an operations experience manager who is responsible for managing customer service more broadly, including driving uniform operational processes to enhance the interconnected and fulfillment experiences.

Speaker #8: As you know, over 50% of our online orders are fulfilled through our stores. Ensuring that our orders are picked, staged, and delivered in a reliable and repeatable fashion is critical to providing a frictionless customer experience.

Speaker #8: Regardless of the type of fulfillment, whether picked up in store or delivered the same day to a home or job site, we have realigned certain positions in our stores to better drive this. We now have an operations experience manager who is responsible for managing customer service more broadly, including driving uniform operational processes to enhance the interconnected and fulfillment experiences.

Speaker #8: And for our pros, our dedicated unified pro team including a pro customer experience manager continues to elevate the pro experience in our stores, by assisting pros and serving as a main point of contact, ensuring a superior and cohesive shopping and fulfillment experience for our ur customers, inside and outside of our stores.

Ann-Marie Campbell: The Pro Pros, our dedicated unified pro team, including a pro customer experience manager, continues to elevate the pro experience in our stores by assisting pros and serving as a main point of contact, ensuring a superior and cohesive shopping and fulfillment experience for our customers inside and outside of our stores. As a result, we've seen increased engagement, higher pro sales, and continued growth in our Pro Xtra loyalty program. We're excited about all of the progress we have made in our stores this year. Our efforts are paying off. This year, our customer satisfaction score increased every quarter, and our tenure with hourly associates is the highest it's been since 2017. Our associates continue to go above and beyond to serve our customers despite a challenging environment, and I'd like to close by thanking them for all that they do.

Speaker #8: As a result, we've seen increased engagement, higher pro sales, and continued growth in our pro extra loyalty program. We're excited about all of the progress we've made in our stores this year.

Speaker #8: Our efforts are paying off. This year, our customer satisfaction score increased every quarter and our tenure with hourly associates is the highest it's been since 2017.

Speaker #8: Our associates continue to go above and beyond to serve our customers despite the challenging environment, and I'd like to close by thanking them for all that they do.

Speaker #8: We are relentlessly focused on delivering the best customer experience in home improvement, and we know that our efforts are positioning us well to grow share in the market.

Ann-Marie Campbell: We are relentlessly focused on delivering the best customer experience in home improvement, and we know that our efforts are positioning us well to grow share in the market. With that, let me turn the call over to Billy.

Speaker #8: With that, let me turn the call over to Billy.

Speaker #9: Thank you, Ann. And good morning, everyone. I want to start by also thanking all of our associates, supplier, and supply chain partners for their ongoing commitment to serving our customers and communities.

Billy Bastek: Thank you, Anne. Good morning, everyone. I want to start by also thanking all of our associates, supplier, and supply chain partners for their ongoing commitment to serving our customers and communities. As you heard from Ted, our performance during the Q4 was largely in line with expectations, with underlying demand in the quarter similar to what we've seen throughout the year. Turning to our merchandising department comp performance for the Q4, 8 of our 16 merchandising departments posted positive comps, including power, electrical, storage, indoor garden, hardware, plumbing, bath, and kitchen. During the Q4, our comp average ticket increased 2.4%. Comp transactions decreased 1.6%. The growth in comp average ticket primarily reflects some price increases, a greater mix of higher ticket items, and customers continuing to trade up for new and innovative products.

Speaker #9: As you heard from Ted, our performance during the fourth quarter was largely in line with expectations, with underlying demand in the quarter similar to what we've seen throughout the year.

Speaker #9: Turning to our merchandising department, comp performance for the fourth quarter: eight of our 16 merchandising departments posted positive comps, including Power, Electrical, Storage, Indoor Garden, Hardware, Plumbing, Bath, and Kitchen.

Speaker #9: During the fourth quarter, our comp average ticket increased 2.4%, and comp transactions decreased 1.6%. The growth in comp average ticket primarily reflects some price increases and a greater mix of higher-ticket items, as customers continue to trade up for new and innovative products.

Speaker #9: Big ticket comp transactions were those over $1,000 for positive 1.3% compared to the fourth quarter of last year. We were pleased with the performance we saw in categories such as power, plumbing, and electrical.

Billy Bastek: Big ticket comp transactions, or those over $1,000, were positive 1.3% compared to Q4 of last year. We were pleased with the performance we saw in categories such as power, plumbing, and electrical. However, larger discretionary projects remain under pressure. During Q4, Pro posted positive comps and outperformed DIY. We saw strength across pro-heavy categories like gypsum, wire, concrete, and plumbing. In DIY, we saw strength across our Gift Center events, hand tools, storage, portable power, and hardscapes. Turning to total company online comp sales leveraging our digital platforms increased approximately 11% compared to Q4 of last year. We're excited about the continued success we are seeing across our interconnected platforms. This quarter, we continued to enhance delivery, reliability, and communication with the rollout of real-time delivery tracking for big and bulky deliveries across all categories.

Speaker #9: However, larger discretionary projects remain under pressure. During the fourth quarter, Pro posted positive comps and outperformed DIY. We saw strength across Pro-heavy categories like gypsum, wire, concrete, and plumbing.

Speaker #9: In DIY, we saw strength across our gift center events, hand tools, storage, portable power, and hardscapes. Turning to total company online comp sales, sales leveraging our digital platforms increased approximately 11% compared to the fourth quarter of last year.

Speaker #9: We're excited about the continued success we are seeing across our interconnected platforms. This quarter, we continued to enhance delivery reliability and communication with the rollout of real-time delivery tracking for big and bulky deliveries across all categories.

Speaker #9: This enhancement gives our customers greater visibility and certainty on the timing of their delivery. We know that as we remove friction from the experience we see incremental customer engagement leading to greater sales across all points of interaction.

Billy Bastek: This enhancement gives our customers greater visibility and certainty on the timing of their delivery. We know that as we remove friction from the experience, we see incremental customer engagement, leading to greater sales across all points of interaction. During Q4, we hosted our Appliance, Gift Center, and Black Friday events. We saw strong engagement across all of these events, with our Gift Center and Black Friday events posting record sales years. We are looking forward to the year ahead, particularly with the spring selling season right around the corner. We have a great lineup of innovative products that provide our customers with tremendous value, from outdoor living products, including patio and grills, to our lineup of outdoor power equipment.

Speaker #9: During the fourth quarter, we hosted our appliance, gift center, and Black Friday events. We saw strong engagement across all of these events with our gift center and Black Friday events posting record sales years.

Speaker #9: We are looking forward to the year ahead. Particularly with the spring selling season right around the corner, and we have a great lineup of innovative products that provide our customers with tremendous value from outdoor living products including patio and grills, to our lineup of outdoor power equipment.

Speaker #9: Whether it's our Ryobi 40-volt lawnmower with a brushless motor and lithium-ion batteries which deliver more power and longer run times, or our Milwaukee 18-volt string trimmer kit designed to meet the needs of the landscape professional.

Billy Bastek: Whether it's our Ryobi 40-volt lawnmower with a brushless motor and lithium-ion batteries, which deliver more power and longer runtimes, or our Milwaukee 18-volt string trimmer kit, designed to meet the needs of the landscape professional. Our Spring Gift Center event continues to lean into cordless technology with a wide assortment of products from Ryobi, Milwaukee, Makita, and DeWalt, many of which are exclusive to The Home Depot in the big box retail channel. We're also excited about our live goods program. Every year, our merchants partner with our national and regional growers to provide our customers with new and improved varieties to enhance the overall garden experience. Investing in our relationships with our growers allows us to continue to drive innovation and value to meet the needs of our customers and improves their shopping experience while building loyalty to The Home Depot.

Speaker #9: In our spring gift center event, continues to lean into cordless technology with a wide assortment of products from Ryobi, Milwaukee, Makita, and DeWalt. Many of which are exclusive to the Home Depot in the big box retail channel.

Speaker #9: We're also excited about our live goods program. Every year, our merchants partner with our national and regional growers to provide our customers with new and improved varieties to enhance the overall garden experience.

Speaker #9: Investing in our relationships with our growers allows us to continue to drive innovation and value to meet the needs of our customers and improves their shopping experience while building loyalty to the Home Depot.

Speaker #9: We remain focused on delivering the best brands assortments and value to our customers. With that, I'd like to turn the call over to Richard.

Billy Bastek: We remain focused on delivering the best brands, assortment, and value to our customers. With that, I'd like to turn the call over to Richard.

Speaker #10: Thank you, Billy. And good morning, everyone. Before I comment on our results, I would like to remind everyone that fiscal 2025 consisted of 52 weeks while fiscal 2024 consisted of 53 weeks.

Richard McPhail: Thank you, Billy, good morning, everyone. Before I comment on our results, I would like to remind everyone that fiscal 2025 consisted of 52 weeks, while fiscal 2024 consisted of 53 weeks. The extra week added approximately $2.5 billion in sales to the Q4 of fiscal 2024. When we report our comparable sales, or comps. We report them on a 52-week to 52-week basis by comparing weeks 1 through 52 of fiscal 2025, with weeks 2 through 53 of fiscal 2024. In the Q4 of 2025, total sales were $38.2 billion, a decrease of $1.5 billion, or approximately 3.8% from last year.

Speaker #10: The extra week added approximately $2.5 billion in sales to the fourth quarter of fiscal 2024. When we report our comparable sales, or comps, we report them on a 52-week to 52-week basis by comparing weeks 1 through 52 of fiscal 2025 with weeks 2 through 53 of fiscal 2024.

Speaker #10: In the fourth quarter of 2025, total sales were $38.2 billion, a decrease of $1.5 billion, or approximately 3.8%, from last year. During the fourth quarter, our total company comps were positive 0.4%, with comps of negative 0.2% in November, positive 0.1% in December, and positive 1.3% in January.

Richard McPhail: During Q4, our total company comps were positive 0.4%, with comps of negative 0.2% in November, positive 0.1% in December, and positive 1.3% in January. Comps in the US were positive 0.3% for the quarter, with comps of negative 0.3% in November, negative 0.2% in December, and positive 1.4% in January. For the year, our sales totaled $164.7 billion, an increase of $5.2 billion, or 3.2% versus fiscal 2024. For the year, total company comp sales increased 0.3%, and US comp sales increased 0.5%.

Speaker #10: Comps in the US were positive 0.3% for the quarter, with comps of negative 0.3% in November, negative 0.2% in December, and positive 1.4% in January.

Speaker #10: For the year, our sales totaled $164.7 billion, an increase of $5.2 billion, or 3.2%, versus fiscal 2024. For the year, total company comp sales increased 0.3% and U.S. comp sales increased 0.5%.

Speaker #10: In the fourth quarter, our gross margin was approximately 32.6%, a decrease of approximately 20 basis points from the fourth quarter last year, primarily reflecting a change in mix as a result of the GMS acquisition, which was in line with our expectations.

Richard McPhail: In Q4, our gross margin was approximately 32.6%, a decrease of approximately 20 basis points from Q4 last year, primarily reflecting a change in mix as a result of the GMS acquisition, which was in line with our expectations. For the year, our gross margin was approximately 33.3%, a decrease of 10 basis points from last year, which was in line with our expectations. During Q4, operating expense as a percent of sales increased approximately 105 basis points to 22.6% compared to Q4 2024. Our operating expense performance reflects natural deleverage from top-line results, as well as lapping the 53rd week. For the year, operating expenses were approximately 20.6% of sales, representing an increase of approximately 70 basis points from fiscal 2024.

Speaker #10: For the year, our gross margin was approximately 33.3%, a decrease of 10 basis points from last year, which was in line with our expectations.

Speaker #10: During the fourth quarter, operating expense as a percent of sales increased approximately 105 basis points to 22.6%, compared to the fourth quarter of 2024.

Speaker #10: Our operating expense performance reflects natural deleverage from top-line results as well as lapping the 53rd week. For the year, operating expenses were approximately 20.6% of sales, representing an increase of approximately 70 basis points from fiscal 2024.

Speaker #10: Our operating margin for the fourth quarter was 10.1%, compared to 11.3% in the fourth quarter of 2024. Excluding intangible asset amortization in the quarter, our adjusted operating margin for the fourth quarter was 10.5%, compared to 11.7% in the fourth quarter of 2024.

Richard McPhail: Our operating margin for Q4 was 10.1%, compared to 11.3% in Q4 of 2024. Excluding intangible asset amortization in the quarter, our adjusted operating margin for Q4 was 10.5%, compared to 11.7% in Q4 of 2024. Our operating margin for the year was 12.7%, compared to 13.5% in 2024. Excluding intangible asset amortization, our adjusted operating margin for the year was 13.1%, compared to 13.8% in 2024. Interest and other expense for Q4 decreased by $57 million to $551 million. In Q4, our effective tax rate was 22%, and for the year was 23.9%.

Speaker #10: Our operating margin for the year was 12.7% compared to 13.5% in 2024. Excluding intangible asset amortization, our adjusted operating margin for the year was 13.1% compared to 13.8% in 2024.

Speaker #10: Interest and other expense for the fourth quarter decreased by 57 million dollars to 551 million dollars. In the fourth quarter, our effective tax rate was 22%, and for the year was 23.9%.

Speaker #10: Our diluted earnings per share for the fourth quarter were $2.58, a decrease of 14.6% compared to the fourth quarter of 2024. Diluted earnings per share for fiscal 2025 were $14.23, a decrease of 4.6% compared to fiscal 2024.

Richard McPhail: Our diluted earnings per share for Q4 were $2.58, a decrease of 14.6% compared to Q4 2024. Diluted earnings per share for fiscal 2025 were $14.23, a decrease of 4.6% compared to fiscal 2024. Excluding intangible asset amortization, our adjusted diluted earnings per share for Q4 were $2.72, a decrease of 13.1% compared to Q4 2024. Adjusted diluted earnings per share for fiscal 2025 were $14.69, a decrease of 3.6% compared to fiscal 2024. Recall that fiscal 2024 included a 53rd week, which added approximately $0.30 to diluted earnings per share and adjusted diluted earnings per share for Q4 and the year.

Speaker #10: Excluding intangible asset amortization, our adjusted diluted earnings per share for the fourth quarter were $2.72, a decrease of 13.1% compared to the fourth quarter of 2024.

Speaker #10: Adjusted diluted earnings per share for fiscal 2025 were $14.69, a decrease of 3.6% compared to fiscal 2024. Recall that fiscal 2024 included a 53rd week which added approximately 30 cents to diluted earnings per share, and adjusted diluted earnings per share for the fourth quarter and the year.

Speaker #10: During the year, we opened 12 new stores. Bringing our store count to 2,359 at the end of fiscal 2025. At the end of the quarter, merchandise inventories were 25.8 billion dollars, up approximately 2.4 billion dollars versus last year, reflecting higher inventory costs and the acquisition of GMS.

Richard McPhail: During the year, we opened 12 new stores, bringing our store count to 2,359 at the end of fiscal 2025. At the end of Q4, merchandise inventories were $25.8 billion, up approximately $2.4 billion versus last year, reflecting higher inventory costs and the acquisition of GMS. Inventory turns were 4.4 times, down from 4.7 times last year. Turning to capital allocation. During Q4, we invested approximately $1.1 billion back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2025 to approximately $3.7 billion. During the year, we paid approximately $9.2 billion in dividends to our shareholders.

Speaker #10: Inventory turns were 4.4 times, down from 4.7 times last year. Turning to capital allocation, during the fourth quarter, we invested approximately $1.1 billion back into our business in the form of capital expenditures.

Speaker #10: This brings total capital expenditures for fiscal 2025 to approximately $3.7 billion. And during the year, we paid approximately $9.2 billion in dividends to our shareholders.

Speaker #10: Today, we announced our board of directors increased our quarterly dividend by 1.3% to $2.33 per share, which equates to an annual dividend of $9.32 per share.

Richard McPhail: Today, we announced our board of directors increased our quarterly dividend by 1.3% to $2.33 per share, which equates to an annual dividend of $9.32 per share. Computed on an average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was approximately 25.7%, down from 31.3% in the Q4 of fiscal 2024. Now I will comment on our outlook for 2026. As we shared at our Investor and Analyst Conference in December, there are a number of dynamics we are observing that are pressuring housing and home improvement demand. The current mortgage rate environment and significant increase in home prices since 2019 have impacted housing affordability.

Speaker #10: Computed on the average of beginning and ending long-term debt and equity, for the trailing 12 months, return on invested capital was approximately 25.7%, down from the quarter of fiscal 2024.

Speaker #10: Now I will comment on our outlook for 2026. As we shared in our investor and analyst conference in December, there are a number of dynamics we are observing that are pressuring housing and home improvement demand.

Speaker #10: The current mortgage rate environment and significant increase in home prices since 2019 have impacted housing affordability. Housing turnover has remained at historical lows since 2023, which has significantly reduced demand for projects and other purchases associated with buying and selling a home.

Richard McPhail: Housing turnover has remained at historical lows since 2023, which has significantly reduced demand for projects and other purchases associated with buying and selling a home. Our customers also tell us they have concerns over general economic uncertainty, including inflation, growing job concerns, and higher financing costs. As we look ahead to fiscal 2026, we anticipate these pressures will persist, as we have not yet seen a catalyst for an inflection in housing activity. As a result, we affirm the preliminary fiscal 2026 guidance we provided at our investor conference. We expect to continue to grow our market share and for our comp sales to range between flat to 2% growth, with total sales growth of between approximately 2.5% and 4.5%, reflecting the contribution of the GMS acquisition, new stores, branches, and tuck-in acquisitions.

Speaker #10: Our customers also tell us they have concerns over general economic uncertainty including inflation, growing job concerns, and higher financing costs. As we look ahead to fiscal 2026, we anticipate these pressures will persist as we have not yet seen a catalyst for an inflection in housing activity.

Speaker #10: As a result, we affirm the preliminary fiscal 2026 guidance we provided at our investor conference. We expect to continue to grow our market share and for our comp sales to range between flat to 2% growth, with total sales growth of between approximately 2.5% and 4.5%, reflecting the contribution of the GMS acquisition, new stores, branches, and tuck-in acquisitions.

Speaker #10: For the year, we expect SRS to deliver mid-single-digit percent organic sales growth. We plan to open approximately 15 new stores and 40 to 50 new SRS locations.

Richard McPhail: For the year, we expect SRS to deliver mid-single-digit percent organic sales growth. We plan to open approximately 15 new stores and 40 to 50 new SRS locations. Our gross margin is expected to be approximately 33.1%. Further, we expect operating margin of approximately 12.4% to 12.6% and adjusted operating margin of approximately 12.8% to 13%. Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately $2.3 billion. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase approximately flat to 4% compared to fiscal 2025. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2026.

Speaker #10: Our gross margin is expected to be approximately 33.1%. Further, we expect operating margin of approximately 12.4 to 12.6% and adjusted operating margin of approximately 12.8 to 13%.

Speaker #10: Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately 2.3 billion dollars. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase approximately flat to 4% compared to fiscal 2025.

Speaker #10: We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2026. We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvement.

Richard McPhail: We believe that we will grow market share in any environment by strengthening our competitive position with our customers and delivering the best customer experience in home improvement. Thank you for your participation in today's call, and Christine, we are now ready for questions.

Speaker #10: Thank you for your participation in today's call and Christine, we are now ready for questions.

Speaker #1: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Steven Forbes with Guggenheim. Please proceed with your question.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #1: For participants using speaker equipment, it may be necessary to pick up your hands up before pressing the star keys. One moment, please, while we pull for questions.

Speaker #1: Thank you. Our first question comes from a line of Steven Forbes with Guggenheim. Please proceed with your question.

Speaker #3: Good morning. Ted, I was down at IBIS and was talking to Chip down there about some of the digital planning tools and some of the initiatives you guys have to improve delivery?

Steven Forbes: Good morning. Ted, I was down at Ibis and was talking to Chip down there about some of the digital planning tools and some of the initiatives you guys have to improve delivery. I don't know if maybe you could just explore the topics on some of the initiatives you're trying to lean into here, digital planning tools being one of them. You mentioned product management, but what are some of the bigger initiatives that you guys are leaning into in 2026 to improve the overall value proposition for your pro?

Speaker #3: So I don't know if maybe you could just explore the topics on some of the initiatives you're trying to lean into here: digital planning tools being one of them.

Speaker #3: You mentioned product management, but what are some of the bigger initiatives that you guys are leaning into in 2026 to improve the overall value proposition for your pro?

Speaker #4: Sure. In Mike's here and he can go into some more detail, but we know we talked about the capabilities we need to deliver for the pro experience.

Richard McPhail: Sure. Mike's here, and he can go into some more detail. You know, we know we talked about the capabilities we need to deliver for the pro experience. We continue to mature our sales force, order management, as you say, our trade credit platform. Delivery has gotten better and better. We've been looking for two sigma on time and complete for our delivery to our pros, and we achieved that this past year.

Speaker #4: We continue to mature our sales force order management, as you say, our trade credit platform, delivery has gotten better and better. We've been looking for two Sigma on time and complete for our delivery to our pros, and we achieved that this past year.

Speaker #4: And also now with the advent of AI tools, we're introducing a number of project management and list builders for our pros, including things like an AI takeoff scheme, letting pros build projects just typing in the type of project they're working on in a pre-populated list of the project in the app for the pro so they don't have to go through and put the hundreds of items and pre-populates and then they can edit that list.

Richard McPhail: Also now with the advent of AI tools, we're introducing a number of project management and list builders for our pros, including things like an AI takeoff scheme, letting pros build projects, just typing in the type of project they're working on in a pre-populated list of the project in the app for the pros, so they don't have to go through and put the, you know, the hundreds of items. It pre-populates, and then they can edit that list, they can save that, repeat it for future jobs. There's a tremendous set of activities.

Speaker #4: They can save that, repeat it for future jobs. So there's a tremendous set of activities.

Speaker #3: Yeah, I mean, you captured a lot of it, Ted. Hence the performance that we had in the fourth quarter. Pleased overall with the investment in the capabilities, both when it comes to in-store investments as well as outside sales.

Jordan Broggi: Yeah, I mean, you captured a lot of it, Ted. You know, hence the performance that we had in Q4. You know, pleased overall with the investment in the capabilities, both when it comes to in-store investments, as well as outside sales. We've improved in-store tools and processes that drive greater engagement with our pros that have resulted in, you know, higher sales there. Record levels of delivery reliability from our order management investments, and we're continuing to take that to another level with job site preferences that we're including in our order management tools, as well as business hours of our customers. We've taken customer communications to a whole new level.

Speaker #3: We've improved in-store tools and processes that drive greater engagement with our Pros, which has resulted in higher sales there. We've seen record levels of delivery reliability from our order management investments, and we're continuing to take that to another level with job site preferences that we're including in our order management tools, as well as the business hours of our customers.

Speaker #3: We've taken customer communications to a whole new level. We used to only be able to communicate to one person on the job. Now, we can communicate to many, including the owner and those that are kind of on the job site when it comes to those deliveries.

Jordan Broggi: We used to only be able to communicate to one person on the job, now we can communicate to many, you know, including the owner and those that are kind of on the job site when it comes to those deliveries. As Ted spoke to, you know, our online B2B sales, you know, outpaced our overall online sales growth, driven by the features that we've added, such as the projects tool, where we're seeing tens of thousands of projects each week being started, and those result in higher conversion and greater engagement around transactions for complex sales. You know, we saw continued growth in our trade credit efforts, along with strong early days from our Blueprint Takeoffs. With all of that in mind, just pleased with the continued momentum in Pro.

Speaker #3: As Ted spoke to, our online B2B sales outpaced our overall online sales growth, driven by the features that we've added, such as the products tool where we're seeing tens of thousands of projects each week being started, and those result in higher conversion.

Speaker #3: And greater engagement around transactions for complex sales, and we saw continued growth in our trade credit efforts, along with strong early days from our AI blueprint takeoffs.

Speaker #3: So, with all of that in mind, just pleased with the continued momentum in Pro.

Speaker #4: I appreciate the call there. Maybe just a quick follow-up.

Steven Forbes: Appreciate the call. Maybe just a quick follow up-

Speaker #5: The handheld delivery?

Speaker #3: Yeah. One of the other capabilities that we've recently rolled out that allows our drivers to stay connected with our customers' needs is our delivery handheld device.

Jordan Broggi: The handheld delivery?

Richard McPhail: Yeah. One of the other capabilities that we've recently rolled out that allows our drivers to stay connected with our customers' needs is our delivery handheld device. This is a tool that we use to track the status of all of our deliveries and the progress that we're making, as well as all of the other requests that we get from our customers to make sure that we're fulfilling the exact needs of the service that they require on their particular job sites.

Speaker #3: This is a tool that we use to track the status of all of our deliveries and the progress that we're making as well as all of the other requests that we get from our customers to make sure that we're fulfilling the exact needs of the service that they require on their particular job sites.

Speaker #4: Yeah. And then as Jordan as we said in our prepared remarks as well, as Billy called out, that also enables our live tracking on big and bulky, which customers have come to expect.

Jordan Broggi: Yeah, then, you know, as Jordan, as we said in our prepared remarks as well, as Billy called out, that also enables our live tracking on big and bulky, which, you know, customers have come to expect on small items. To be able to track live a bulky delivery, whether that's a flatbed rolling down with lumber to a job site or an appliance, showing up at the home, that's been a really big win for our customers, and they are loving that feature that we've rolled out, which was enabled by our new handheld.

Speaker #4: On small items, but to be able to track live a bulky delivery, whether that's a flatbed rolling down with lumber to a job site or an appliance showing up at the home, that's been a really big win for our customers and they are loving that feature that we've rolled out, which was enabled by our new handheld.

Speaker #3: Appreciate all that. And just a quick follow-up, maybe for Richard, if you could just maybe set the base for SRS sales, in 2025, and then comment on how GMS performed in the fourth quarter relative to that 1.1 billion framework.

Steven Forbes: Appreciate all that. Just a quick follow-up, maybe for Richard. If you could maybe set the base for SRS sales in 2025, and then comment on how GMS performed in Q4 relative to that $1.1 billion framework or guidance framework that you had.

Speaker #3: Or guidance framework that you had.

Speaker #4: Sure. So look, we were really pleased continue to be really pleased with SRS's performance I think it's important to provide some context. So SRS was down low single-digit comps year over year.

Richard McPhail: Sure. Look, we were really pleased, continue to be really pleased with SRS's performance. I think it's important to provide some context. SRS was down low single digit comps year-over-year for the Q4. If you look at the industry, in the Q4, according to ARMA data, total industry shipments of shingle squares were down 28% year-over-year. That's the lowest industry volume since 2019. That Q4 literally pulled the whole year of 2025 shipments down to the lowest annual volume since 2019. It was a remarkably bad quarter for the roofing industry. With that, SRS performed exceptionally and by all external measures took share in the quarter.

Speaker #4: For the fourth quarter. But if you look at the industry, in the fourth quarter, according to ARMA data, total industry shipments of shingles squares were down 28% year over year.

Speaker #4: That's the lowest industry volume since 2019. And so that fourth quarter literally pulled the whole year of 2025 shipments down to the lowest annual volume since 2019.

Speaker #4: So it was a remarkably bad quarter for the roofing industry. With that, SRS performed exceptionally. And by all external measures, took share in the quarter.

Speaker #4: With respect to GMS, we've owned them for five months of the year and we're pleased with their performance and very happy to welcome them to the Home Depot family and I'll turn to Mike in a second just to talk about the power of SRS and GMS with Home Depot.

Richard McPhail: Um, with respect to GMS, uh, we've owned them for five months of the year, and we're pleased with their performance and, uh, very happy to welcome them, uh, to the, to the Home Depot family. And I'll turn to Mike in a second just to talk about the power of SRS and GMS with, with Home Depot. Um, but, but let's talk about, uh, SRS a bit more. So look, that lack of demand in the market, uh, did put significant pressure on the pricing environment for SRS in the fourth quarter. We expected that when we, uh, reset our guidance at the end of Q3. We knew that given the absence of storms in Q3, the industry was likely to see pricing performance. So, uh, they did invest in price to maintain share gains. That will bleed over into our, uh, margin expectations for the first quarter.

Speaker #4: But let's talk about SRS a bit more. So look, that lack of demand in the market did put significant pressure on the pricing environment for SRS in the fourth quarter.

Speaker #4: We expected that when we reset our guidance at the end of Q3. We knew that given the absence of storms in Q3, the industry was likely to see pricing performance.

Speaker #4: So, they did invest in price to maintain share gains that will bleed over into our margin expectations for the first quarter. But as Ted said, we anticipate and expect them to grow organic sales mid-single digit for 2026 and are really excited about what we're seeing. And Steve, you'd mentioned the IBS—hopefully that came to life—the ties between SRS and GMS and Home Depot.

Richard McPhail: As Ted said, we anticipate and expect them to grow organic sales mid-single digit for 2026, and are really excited about what we're seeing. You know, Steve, you'd mentioned the IBS. Hopefully, that came to life, the ties between SRS and GMS and Home Depot. Mike, maybe you can just talk a little bit about how we're working together.

Speaker #4: Mike, maybe you can just talk a little bit about how we're working together.

Speaker #3: Yeah, I mean, that was the opportunity for us to focus further on revenue synergies. We've had a number of examples where we've approached our customers in a combined fashion, but also a number of customers, frankly, asking for that from us.

Jordan Broggi: Yeah, I mean, now's the opportunity for us to focus further on revenue synergies. We've had a number of examples where we've approached our customers in a combined fashion, but also a number of customers, frankly, asking for that from us. You know, one particular example, you know, at the moment amongst many, is the, you know, ability to turn a multifamily construction and property management company from a significant customer of one of our companies to be that way for all of Home Depot, HD Supply, SRS, and GMS. This, you know, as our national account structure continues to grow, you know, take an opportunity to support our customers better. You know, beyond that, we're pleased also with what we're seeing in some pilot markets with Home Depot and SRS, with our Pro Referral project on roofing leads.

Speaker #3: One particular example, at the moment amongst many, is the ability to turn a multifamily construction and property management company from a significant customer of one of our companies to be that way for all of Home Depot, HD Supply, SRS, and GMS.

Speaker #3: And this is our national account structure continues to grow, take an opportunity to support our customers better. Beyond that, we're pleased also with what we're seeing in some pilot markets with Home Depot and SRS with our pro referral project on roofing leads.

Speaker #3: We've also done the mapping of our common customers for HD reps to be able to contact HD Supply reps to be able to contact SRS or GMS sales rep to have that common approach.

Jordan Broggi: We've also done the mapping of our common customers for HD reps to be able to contact HD Supply, reps to be able to contact SRS or GMS, sales rep to have that common approach. Very much focused on driving these revenue synergies.

Speaker #3: So, very much focused on driving these revenue synergies.

Speaker #4: Thank you.

Steven Forbes: Thank you.

Speaker #6: Our next question comes from line of Zach Fadem with Wells Fargo. Please proceed with your question.

Operator: Our next question comes from the line of Zach Fadem with Wells Fargo. Please proceed with your question.

Speaker #7: Hey, good morning. So as you look back through 2025, could you talk about the performance of markets like Florida and Texas that saw a more challenging housing turnover and home price appreciation environment compared to those markets with perhaps a more favorable or normalized outlook for turnover?

Zach Fadem: Hey, good morning. As you look back through 2025, could you talk about the performance of markets like Florida and Texas that saw a more challenging housing turnover and home price appreciation environment compared to those markets with perhaps a more favorable or normalized outlook for turnover? Whether you saw any change or bifurcation between these two types of markets through the year into early 2026.

Speaker #7: And whether you saw any change or bifurcation between these two types of markets through the year into early '26?

Speaker #4: Sure, Zach. I would say that the first and perhaps most important throughout the year, we don't have perfect adjustments for storms in the like, but as best as we can adjust, our comp performance was relatively stable across the four quarters of the year.

Ted Decker: Sure, Zach. I would say that the first and perhaps most important, throughout the year, we don't have perfect adjustments for storms and the like, but as best as we can adjust, our comp performance was relatively stable across the four quarters of the year, and, you know, something under 1% consistent underlying demand comp across the country. Now, obviously, the geographies that were lapping the significant storms from last year and didn't have any storm activity, it was quite remarkable that 2025, really, from hail to wind to hurricane, there was literally no storm activity in 2025. Those are the most pronounced geographies where you have tough comp compares of 25 over 24.

Speaker #4: And something under 1% consistent underlying demand comp across the country. Now, obviously, the geographies that were lapping the significant storms from last year didn't have any storm activity.

Speaker #4: It was quite remarkable that 2025, really from hail to wind to hurricane, there were literally no storm activity in 2025. So those are the most pronounced geographies where you have tough comp compares of '25 over '24.

Speaker #4: We're also seeing geographies where you are starting to see some housing price declines and you're seeing some markets with lower turnover rates than others.

Ted Decker: We're also seeing geographies where you are starting to see some housing price declines, you're seeing some markets with lower turnover rates than others. As we've always said, if you look over time, the highest correlation to home improvement activity is probably home prices and secondly, turnover. I think because we're sort of bouncing, hopefully, we're bouncing along the bottom of turnover, and we're not seeing meaningful price declines. We haven't seen a lot of difference in regional geographical performance just based on price alone. We have some markets that you'd look at and say, Yeah, price is still going up, sales are a little stronger. We look at other markets that price is more challenged, and you can see a weaker comp. We have things in between. We have markets where prices are adjusting down, but actually had quite strong comps.

Speaker #4: And as we've always said, if you look over time, the highest correlation to home improvement activity is probably home prices in secondly turnover. I think because we're sort of bouncing, hopefully we're bouncing along the bottom of turnover and we're not seeing meaningful price declines, we haven't seen a lot of different in regional geographical performance just based on price alone.

Speaker #4: We have some markets that you'd look at and say, "Yeah, price is still going up. Sales are a little stronger." We look at other markets that price is more challenged and you can see a weaker comp.

Speaker #4: But then we have things in between. We have markets where prices are adjusting down, but actually had quite strong comps. So we always talked about prices being certainly very important, but a lag.

Ted Decker: We always talked about prices being, you know, certainly very important, but a lag, and I, and I think the price declines that have happened are still within that window, that we're not seeing statistical relevance. On turnover, while there are some markets that have weaker turnover, I mean, we're at, what? 30, 40-year lows across the country. Again, with everyone sort of bouncing along decade lows, we're not seeing a big differential.

Speaker #4: And I think the price decline sort of happened, or is still within that window that we're not seeing statistical relevance. And on turnover, while there are some markets that have weaker turnover, I mean, we're at, what, 30-, 40-year lows across the country.

Speaker #4: So again, with everyone sort of bouncing along decade lows, we're not seeing a big differential.

Speaker #8: Got it. And then, thinking through some of the moving pieces for '26, I'm looking out the window and I'm seeing two feet of snow on the ground from last night.

Zach Fadem: Got it. Then thinking through some of the moving pieces for 2026, I'm looking out the window, and I'm seeing two feet of snow on the ground from last night. We've got, you know, larger tax refunds coming, perhaps also a more manageable tariff environment. Could you talk through these dynamics, particularly, you know, as you think through first half versus second half within your flat to 2% comp outlook?

Speaker #8: We've got larger tax refunds coming perhaps also a more manageable tariff environment. Could you talk through these dynamics, particularly as you think through first half versus second half within your flat to 2% comp outlook?

Speaker #4: Sure. And I'll do a higher level and then Billy can talk a little more specifically about tariffs. I mean, we've very purposely obviously have a range and we maintain that range from December of flat to 2%.

Ted Decker: Sure. I'll do a higher level, and then Billy can talk a little more specifically about tariffs. I mean, we very purposefully, obviously, have a range, and we maintain that range from December of flat to 2%. We think the overall market is likely down 1 to 1. In each instance, we believe within our range that we would be outperforming the market. The things that could point to a little stronger market performance would be improved affordability, and that would be, you know, we have incomes rising, we have some nice improvement in mortgage rates. I think this morning, we came just under 6% on the 30-year.

Speaker #4: We think the overall market is likely down 1 to up 1. So in each instance, we believe within our range that we would be outperforming the market.

Speaker #4: The things that could point to a little stronger market performance would be improved affordability. And that would be, we have incomes rising, we have some nice improvement in mortgage rates.

Speaker #4: I think this morning we came just under 6% on the 30-year. And in the longer medium-longer term, modest price adjustments up to the 50% increase from the end of 2019 would be helpful from an affordability perspective.

Ted Decker: In the longer, you know, medium, longer term, modest price adjustments, you know, after the 50% increase from the end of 2019, would be helpful from an affordability perspective. Tax stimulus, you mentioned. We're actually not counting on a lot of support from tax stimulus. We've seen very large ranges of what will show up in household pocketbooks. You know, we've seen as low as 70 and as high as $200 billion in terms of refunds and adjusted rates for 2026. If you take a midpoint of that, $135 odd billion, and you look at our share, Home Depot's share of PCE, which is about 60 basis points, you would get at the midpoint, maybe half a point of comp support at that high level analysis of tax relief.

Speaker #4: Tax stimulus, you mentioned we're actually not counting on a lot of support from tax stimulus. We've seen very large ranges of what will show up in household pocketbooks.

Speaker #4: And we've seen as low as $70 billion and as high as $200 billion in terms of refunds and adjusted rates for 2026. If you take a midpoint of that, $135-odd billion, and you look at our share—Home Depot's share of PCE, which is about 60 basis points—you would get, at the midpoint, maybe half a point of comp support at that high-level analysis of tax relief.

Speaker #4: But we're hearing that it's just as likely that that's either going to be used for debt paydown for lower income deciles, or saved by higher income deciles.

Ted Decker: We're hearing that it's just as likely that that's either gonna be used for debt paydown, for lower income deciles, or saved by higher income deciles. We're not planning on a lot. We've drilled to get some tax stimulus benefit, but we're not planning on a lot of it.... Tariffs, I mean, this news is breaking by the moment. Billy Bastek, why don't you and your team have been-

Speaker #4: So, we're not planning on a lot. We've drilled to get some tax stimulus benefit, but we're not planning on a lot of it. And then tariffs—I mean, this news is breaking by the moment. And Billy, why don't you—you and your team have been at it for almost a year now.

Speaker #8: Yeah, Zach, thanks for the question. I just from a high level, I just have a reminder we've talked about this in the past, but it's important to remember that more than 50% of our projects are sourced domestically and haven't been subject to tariffs.

Billy Bastek: Yeah.

Ted Decker: been at it for almost a year now.

Billy Bastek: Yeah, Zach, thanks for the question. you know, I just, you know, from a high level, a reminder, we've talked about this in the past, but it's important to remember that, you know, more than 50% of our projects are sourced domestically and haven't been subject to tariffs. obviously, the announcement on Friday and then the administration over the weekend, we're still analyzing the impacts of those decisions. I can tell you that, you know, we're gonna continue to be the customer's advocate for value. I can't say enough about how pleased I am with the merchants, our finance teams, and our supply chain and logistics folks. Our sourcing offices all over the world have done an incredible job and spent, you know, the better part of almost a year now working through that.

Speaker #8: Obviously, the announcement on Friday, and then the administration over the weekend—we're still analyzing the impacts of those decisions. I can tell you that we're going to continue to be the customers' advocate for value.

Speaker #8: I can't say enough about how pleased I am with the merchants. Our finance teams, our supply chain and logistics folks, our sourcing offices all over the world have done an incredible job and spent the better part of almost a year now working through that.

Speaker #8: And just to give you some context, we're mostly done with tariff-related pricing actions. As it relates to the impacts back to April, and to give some again context around that, if you think about our exposure was kind of mid-single digits.

Billy Bastek: Just to give you some context, you know, we're mostly done with tariff-related pricing actions as it relates to the impacts, you know, back to April. To give some, again, context around that, if you think about, you know, our exposure was kind of mid-single digits. And then if you think of like SKU price, that's right about 3%, just in terms of the impact. We feel great about our position. Our teams, along with our merchants, our suppliers, have done an incredible job continuing to advocate on low prices and being the customer's advocate there. We look forward to spring, as I mentioned in my prepared remarks. As I said, we're mostly done with the related pricing actions around what we've seen so far.

Speaker #8: And then if you think of like SKU price, that's right about 3% just in terms of the impact. So we feel great about our position, our teams along with our merchants, our suppliers have done an incredible job continuing to advocate on low prices and being the customer's advocate there.

Speaker #8: So we look forward to spring, as I mentioned on my prepared remarks, and as I said, we're mostly done with the related pricing actions around what we've seen so far.

Speaker #4: And Zach, what may drive us to the lower end of the range would be if the market's not performing as well. And the number one driver of that would be continued consumer uncertainty.

Ted Decker: Zach...

Billy Bastek: Thanks, bro.

Ted Decker: What may drive us to the lower end of the range would be, you know, if the market's not performing as well. The number one driver of that would be continued consumer uncertainty. That's still the number one reason why people are telling us, our customers are telling us that they're not investing, certainly in large projects. That has everything to do with consumer confidence and sentiment, jobs picture, overall, you know, price levels and affordability in the economy. Home prices, if we do start to see some wider spread home price decrease, that may have a negative psychological impact. Turnover stays low, and that there's a little more price elasticity.

Speaker #4: That's still the number one reason why people are telling us our customers are telling us that they're not investing, certainly in large projects. And that has everything to do with consumer confidence and sentiment, jobs picture, overall price levels and affordability in the economy.

Speaker #4: Home prices if we do start to see some wider spread home price decrease that may have a negative psychological impact. Turnover stays low and that there's a little more price elasticity.

Speaker #4: As Billy said, while we have a modest year-over-year price outlook for the year, we could see higher responses of elasticity. So that could be on the macro why we would have a more challenged year.

Ted Decker: As Billy said, while we have a modest, year-over-year, you know, price outlook for the year, we could see higher responses of elasticity. That could be, on the macro, why we would have a more challenged year as an industry. Then we have a little unique profile of the year by quarter going into 2026, which Richard will take us through.

Speaker #4: As an industry, and then we have a little unique profile of the year by quarter going into '26, which Richard will take us through.

Speaker #8: Sure. So you mentioned the shape of the year and we thought that it would be helpful to give a little more color than typical on the shape of the year.

Richard McPhail: Sure. You mentioned the shape of the year, and we thought that it would be helpful to give a little more color than typical on the shape of the year. First, we expect our comps in the second half to be slightly higher than our comps in the first half. This is a reflection of compares to 2025 storm activity and the absence thereof. That is, in essence, what is shaping our comp expectation for the year. Second, we expect gross margin to be down by about 24 basis points year-over-year, reflecting the annualization of GMS. Recall that the pro forma impact of GMS to gross margin is about 40 basis points per year, and so that 24 basis points reflects about 7 non-comp months of ownership.

Speaker #8: First, we expect our comps in the second half to be slightly higher than our comps in the first half. This is a reflection of compares to 2025 storm activity in the absence thereof.

Speaker #8: That is, in essence, what is shaping our comp expectation for the year. Second, we expect gross margin to be down by about 24 basis points year over year, reflecting the annualization of GMS.

Speaker #8: So, recall that the pro forma impact of GMS to gross margin is about 40 basis points per year. And so that 24 basis points reflects about seven non-comp months of ownership.

Speaker #8: This annualization means that we expect our first half gross margin to be down about 50 basis points versus last year, and our second half gross margin to be right around flat to last year.

Richard McPhail: This annualization means that we expect our first half gross margin to be down about 50 basis points versus last year, and our second half gross margin to be right around flat to last year. You're gonna see the largest year-over-year impact to gross margin in Q1, and then that will gradually improve through the year. In addition, due to the timing of expense comparisons versus last year, and this is also driven by the addition of the GMS expense base, compared to the first half of last year. The addition of that expense base, along with some other timing, means that we expect operating expense as a percentage of sales, to be at their highest level of the year in Q1.

Speaker #8: And so you're going to see the largest year-over-year impact to gross margin in the first quarter and then that will gradually improve through the year.

Speaker #8: In addition, due to the timing of expense comparisons versus last year—and this is also driven by the addition of the GMS expense base—compared to the first half of last year.

Speaker #8: So the addition of that expense base along with some other timing means that we expect operating expense as a percentage of sales to be at their highest level of the year in Q1.

Speaker #8: So as a result of all this, our expectations are that our year-over-year EPS performance will be mid-single digit percentage negative in Q1, improving through the year.

Richard McPhail: As a result of all this, our expectations are that our year-over-year EPS performance will be mid-single digit percentage negative in Q1, improving through the year. This is solely due to acquisition, annualization, and a few timing comparisons.

Speaker #8: And this is solely due to acquisition annualization and a few timing comparisons.

Speaker #4: Really appreciate all the time, guys. Thanks so much.

Billy Bastek: Really appreciate all the time, guys. Thanks so much.

Speaker #1: Our next question comes from line of Michael Lasser with UBS. Please proceed with your question.

Operator: Our next question comes from line of Michael Lasser with UBS. Please proceed with your question.

Speaker #9: Good morning. Thank you so much for taking my question. You mentioned that SRS was a little bit more aggressive on the pricing side in the fourth quarter in order to maintain market share.

Michael Lasser: Good morning. Thank you so much for taking my question. You mentioned that SRS was a little bit more aggressive on the pricing side in Q4 in order to maintain market share, and you expect some of that to persist in Q1. Do you think that's going to linger beyond Q1? Are you seeing signals of that behavior happening in anywhere beyond just the roofing category, such that it could lead to more volatility in the Home Depot's gross margin rate over time?

Speaker #9: And you expect some of that to persist in the first quarter. So do you think that's going to linger beyond the first quarter? And are you seeing signals of that behavior happening anywhere beyond just the roofing category, such that it could lead to more volatility in Home Depot's gross margin rate over time?

Speaker #4: Thanks, Michael. I don't think it would lead to significantly more volatility over time. I think with the dramatic fall in roofing shipments in 2024, again, as Richard said, down 28%.

Ted Decker: Thanks, Michael. I don't think it would lead to significantly more volatility over time. I think with the dramatic fall in roofing shipments in 2024, again, as Richard said, down 28%, you know, SRS just took an opportunity, which we fully supported, to take share. Remember, not having storms in the back half of 2024, stronger impact in the back half of 2025, but some of that will bleed into Q1 as well. We're not expecting, you know, a robust building materials environment in Q1, and we're happy to make the investments and take share.

Speaker #4: SRS just took an opportunity, which we fully supported, to take share and remember not having storms in the back half of '24. Stronger impact in the back half of '25, but some of that will bleed into Q1 as well.

Speaker #4: So we're not expecting a robust building materials environment in Q1, and we're happy to make the investments and take share.

Speaker #8: And that's all embedded in our guidance for the year.

Billy Bastek: That's all embedded in our guidance for the year.

Speaker #9: Okay. Thank you very much for that. If you had perfect insight that housing turnover was going to remain muted through 2027, would that change any of your capital allocation priorities, especially now that the Home Depot has made a lot of foundational investments, both organically as well as through acquisitions, how are you going to approach balancing returning capital to shareholders with continuing to build out the capabilities that are necessary to capitalize on the pro ecosystem that you've built?

Michael Lasser: Okay, thank you very much for that. If you had perfect insight that housing turnover was gonna remain muted through 2027, would that change any of your capital allocation priorities, especially now that The Home Depot has made a lot of foundational investments, both organically as well as through acquisitions? How are you going to approach balancing returning capital to shareholders with continuing to build out the capabilities that are necessary to capitalize on the pro ecosystem that you've built?

Speaker #4: Well, Michael, if turnover and starts in all housing activity is more or less flat through '26, then we'll have the absence of further declines.

Ted Decker: Well, Michael, if turnover in starts and all housing activity is more or less flat through 26, you know, we'll have the absence of further declines. In 25, as the market continued to drop off, we took share, and we'd look to take share in 26 as well. At this point, in the level of potential downs, you know, we said -1, potentially to +1, that would not be a significant enough drop in the overall macro of our space to come off our investment profile. We're extremely happy with the strategy that we laid out in December, that we are focused on our core and our culture, and we continue to invest in our stores, in the maintenance of the stores, in the shopping environment, and also building new stores.

Speaker #4: And in '25, as the market continued to drop off, we took share. And we'd look to take share in '26 as well. At this point in the level of potential downs, we said minus one potentially to plus one.

Speaker #4: That would not be a significant enough drop in the overall macro of our space to come off our investment profile. We're extremely happy with the strategy that we laid out in December—that we are focused on our core and our culture, and we continue to invest in our stores.

Speaker #4: And the maintenance of the stores in the shopping environment and also building new stores interconnected penetration continues to grow, delivery continues to grow, so we never come off all the investments we're making in the strong results on our interconnected portfolio in pros represents in any market environment still that 200 billion dollars of white space for us.

Ted Decker: Interconnected penetration continues to grow. Delivery continues to grow. We've never come off all the investments we're making and the strong results on our interconnected portfolio. Pros represents, in any market environment, still that $200 billion of white space for us. That is the share we're capturing, and we would continue to invest in that to take share.

Speaker #4: That is the share we're capturing, and we would continue to invest in that to take share.

Speaker #8: And from a capital allocation perspective, our principles haven't changed as Ted said. We reinvest in the business first. And look, we have a high bar for what we're willing to invest in.

Billy Bastek: From a capital allocation perspective, our principles haven't changed. As Ted said, we reinvest in the business first, and look, we have a high bar for what we're willing to invest in. Every project has to provide an exceptional return on investment, and we feel like that is our profile. After that, we return our capital to shareholders in the form of dividends. You know, once we return to an excess cash position, which we anticipate will be sometime in the first half of 2027, we would expect to return to share repurchases.

Speaker #8: Every project has to provide an exceptional return on investment, and we feel like that is our profile. And after that, we return our capital to shareholders in the form of dividends.

Speaker #8: And once we return to an excess cash position, which we anticipate will be sometime in the first half of 2027, we would expect a return to share repurchases.

Speaker #9: Very helpful. Thanks again.

Michael Lasser: Very helpful. Thanks again.

Speaker #1: Our next question comes from line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Operator: Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Speaker #10: Thanks, everyone. Good morning. I want to follow up on consumer health. Can you talk about if the consumer is behaving a little more value-conscious?

Simeon Gutman: Thanks, everyone. Good morning. I want to follow up on consumer health. Can you talk about if the consumer is behaving a little more value conscious? There's always this higher spending you're gonna get from a turning home versus a non-turning home. Is there anything that you're seeing in that multiplier that's changing? Is the consumer not spending as much when they are turning a home over? Thanks.

Speaker #10: And then there's always this higher spending you're going to get from a turning home versus a non-turning home. Is there anything that you're seeing in that multiplier that's changing as the consumer's not spending as much when they are turning a home over?

Speaker #10: Thanks.

Speaker #8: Simeon and Philly, thanks for the question. I'll take the first part just around what we're seeing from a customer standpoint. We haven't seen it's really been balanced throughout the entire year.

Billy Bastek: Simeon, it's Billy. Thanks for the question. I'll take the first part just around, you know, what we're seeing from a customer standpoint. You know, we haven't seen. It's really been balanced throughout the entire year. Obviously, you have different points in time. I mentioned the, you know, record sales we had in our Black Friday events, in our Gift Center. You know, great interaction across our entire interconnected experience. You know, we haven't seen a lot of trade down, but we've seen some, as we've talked about, you know, countertops and things of those nature. We saw a little bit, you know, in our appliance business as well, but haven't seen that more broadly. Just very consistent across every single quarter.

Speaker #8: Obviously, you have different points in time. I mentioned the record sales we had in our Black Friday events, in our gift center. So great interaction across our entire interconnected experience.

Speaker #8: We haven't seen a lot of trade down, but we've seen some as we've talked about countertops and things of that nature. We saw a little bit in our appliance business as well.

Speaker #8: But haven't seen that more broadly, but just very consistent across every single quarter. Outside of the dynamics we've talked about—whether those are storms or other things—we continue to see strong customer engagement.

Billy Bastek: Outside of the dynamics we've talked about, whether those are storms or other things, we continue to see strong customer engagement. Don't really see a decline or trade down, if you will, from what customers are engaging in. As I mentioned, we had a record Q4 across our events. Where we've continued to create great value for customers, we're seeing just great interaction across the board.

Speaker #8: Don't really see a decline or trade down, if you will, from what customers are engaging in. And as I mentioned, we had a record Q4 across our events.

Speaker #8: So where we've continued to create great value for customers, we're seeing just great interaction across the board.

Speaker #4: Yeah. I think Simeon had a dynamic we're seeing in others in our space who have reported on the supplier side have said some similar things that with turnover down and people still wanting to move, they're not spending as much in their home if they anticipate moving in the next year or two.

Ted Decker: Yeah, I think, Simeon, a dynamic we're seeing and others in our space who have reported on the supplier side and have said some similar things, that, you know, with turnover down and people still, you know, wanting to move, they're, you know, not spending as much in their home if they anticipate moving in the next year or two. There's maybe a bit more repair than replace. You've heard us talk before about the cumulative underspend in home improvement, which, you know, we use some third-party consulting folks, who put that at $22 billion today, that people have, you know, underspent in the aging home. Turnover obviously helps people, you know, fix things up before they sell, and the new owner, you know, modifies the house to how they want it.

Speaker #4: So there's maybe a bit more repair than replace. And you've heard us talk before about the cumulative underspend in home improvement, which we use some third-party consulting folks who put that at 22 billion today.

Speaker #4: People have underspent in the aging home. So turnover obviously helps people fix things up before they sell, and the new owner modifies the house to how they want it.

Speaker #4: But it also has an impact on the people who think they're going to move and are just waiting, in more of a repair than a replacement cycle.

Ted Decker: It also has an impact of the people who think they're gonna move and just waiting in more of a repair than a replacement cycle. I don't necessarily think that's gonna get, you know, any worse, but we're certainly bouncing along what we hope would be a bottom in things like turnover.

Speaker #4: I don't necessarily think that's going to get any worse, but we're certainly bouncing along what we hope would be a bottom in things like turnover.

Speaker #10: Okay. And just a follow-up to the earlier question on the pro. When you bought SRS, we talked a lot about order management and trade credit.

Simeon Gutman: Okay. Just to follow up to the earlier question on the Pro. When you bought SRS, we talked a lot about order management and trade credit as capabilities that needed to be implemented for The Home Depot. It sounds like the rollout of that is done, or is 2026 continued rollout of those capabilities across the rest of the enterprise? You know, it's not clear how, you know, how much of that is in place, versus how much of that needs to get done, versus now you can execute and drive the business.

Speaker #10: As capabilities that needed to be implemented for the Home Depot. It sounds like the rollout of that is done, or is '26 continued rollout of those capabilities across the rest of the enterprise?

Speaker #10: It's not clear how much of that is in place versus how much of that needs to get done versus now you can execute and drive the business.

Speaker #4: Yeah, it's Mike here. I mean, I would say a good high percentage, depending on the capability, is done on pro-trade credit. There's continued investments this year.

Jordan Broggi: Yes, Mike here. I mean, I would say, you know, a good high percentage, depending on the capability, you know, is done. You know, on Pro Trade Credit, there's continued investments this year, you know, to bring it online, to bring it down to a store level throughout the year, versus a bit more focused on our outside sales right now. Those capabilities will come out this year. On the pricing side, you know, we are into a number of pilots right now that we're looking to expand later this year, to bring it across the country. From an order management standpoint, we're pleased with the improvements that we've seen in delivery reliability year after year after year, you know, from John's team and beyond.

Speaker #4: To bring it online, to bring it down to a store level throughout the year versus a bit more focused on our outside sales. Right now, so those capabilities will come out this year.

Speaker #4: On the pricing side, we are into a number of pilots right now that we're looking to expand. Later this year, to bring it across the country.

Speaker #4: And from an order management standpoint, we're pleased with the improvements that we've seen in delivery reliability year after year after year. From John's team and beyond, but there are still opportunities for some order consolidation work to go on.

Jordan Broggi: There are still opportunities for some order consolidation work to go on. Those will happen kind of throughout the year using our One Supply Chain system versus having to rely on our stores that we do in some cases when it comes to some of our non-stock deliveries out to our customers. Further, you know, on the, on the B2B side, the opportunity to invest there further in areas such as, you know, e-procurement integration for spend management tools that a number of our customers use, along with construction management software integration, you know, when it comes to job management software that customers use. There is a continued healthy build-out in 2026 to be done, although a significant portion has been completed already.

Speaker #4: And those will happen kind of throughout the year using our one supply chain system versus having to rely on our stores. That we do in some cases when it comes to some of our non-stock deliveries.

Speaker #4: Out to our customers. And then further on the B2B side, the opportunity to invest there further in areas such as e-procurement integration for spend management tools that a number of our customers use.

Speaker #4: Along with construction management software integration when it comes to job management software that customers use. So there is a continued healthy build-out in 2026 to be done.

Speaker #4: Although a significant portion has been completed already, but Simeon on the vision of SRS and now GMS. Ultimately, cross-sell opportunity and further penetration with large remodelers.

Ted Decker: Simeon, on the, you know, the vision of, you know, SRS and now GMS, you know, ultimately, you know, cross-sell opportunity and further penetration with large remodelers and builders, we're super excited about that in starting to see some really nice wins in cross-selling, where either The Home Depot, the GMS, or the SRS sales rep, who have a line of business with a particular customer, have done the introductions, and we're winning, you know, frankly, you know, tens of thousands of incremental homes through a warm handoff with the other product categories that of the team that was introduced. Also on commercial roofing, SRS does some commercial roofing.

Speaker #4: In builders. We're super excited about that in starting to see some really nice wins in cross-selling where either the Home Depot, the GMS, or the SRS sales rep who have a line of business with a particular customer have done the introductions and we're winning frankly tens of thousands of incremental homes through a warm handoff with the other product categories that of the team that was introduced.

Speaker #4: And also on commercial roofing, SRS does some commercial roofing. So when you think of our stores and our warehouses and our larger suppliers and builders of those commercial properties, they're also happy to use SRS's commercial roofing capabilities.

Ted Decker: When you think of, you know, our stores and our warehouses and our larger suppliers and builders of those commercial properties are also happy to use SRS's commercial roofing capabilities. The vision of, you know, being a point of contact for that Pro and cross-selling is really gaining momentum, which we're really happy about.

Speaker #4: So the vision of being a point of contact for that Pro and cross-selling is really gaining momentum, which we're really, really happy about.

Speaker #10: Okay. Thank you. Good luck.

Simeon Gutman: Thank you. Good luck.

Speaker #1: Our next question comes from the line of Steven Zacone with Citi. Please proceed with your question.

Operator: Our next question comes from line of Steven Zaccone with Citi. Please proceed with your question.

Speaker #11: Great, good morning. Thanks very much for taking my questions. I wanted to follow up on the same sort of sales outlook. First question, just on how to think about ticket versus transactions within the outlook.

Steven Zaccone: Great. Good morning. Thanks very much for taking my questions. Wanted to follow up on the same store sales outlook. First question, just on how to think about ticket versus transactions within the outlook. Any cadence to be mindful of there? Then big ticket, you know, saw an inflection in 2025. How do you see that performing in 2026? Just curious on the balance between replacement cycles and innovation versus large private project activity still being a drag.

Speaker #11: Any cadence to be mindful of there? And then big ticket saw an inflection in '25. How do you see that performing in 2026? Just curious on the balance between replacement cycles and innovation.

Speaker #11: Versus large private project activity still being a drag.

Speaker #12: Right. So thank you for the question. As Billy said, for 2026, you're likely to see ticket reflect that 3 percentage point increase in retails as we end our or really our essentially done with our price actions.

Richard McPhail: Great. You know, thanks for the question. You know, as Billy said, for 2026, you're likely to see ticket reflect that 3 percentage point increase in retails, you know, as we essentially done with our price actions. You'll see that on average through the year. It'll be a little higher at the beginning of the year, a little lower at the end of the year than that 3. We right now, our guidance assumes negative transactions offsetting that ticket.

Speaker #12: You'll see that, on average, through the year, it'll be a little higher at the beginning of the year, a little lower at the end of the year than that 3.

Speaker #12: And right now, our guidance assumes negative transactions offsetting that ticket. And Billy, maybe talk about big ticket.

Speaker #11: Yeah. We were pleased with our big ticket comp transactions, as I mentioned, transactions over $1,000 up 1.3% for the quarter that's now multiple quarters where we've seen positive impact.

Ted Decker: ... Billy, maybe talk about big ticket.

Billy Bastek: Yeah, we were pleased with our big ticket comp transactions. As I mentioned, transactions over $1,000 up 1.3% for the quarter. That's now multiple quarters where we've seen positive impact. The dynamic of that was a little bit different, as Ted alluded to, around kind of the maintenance and repair. You think of plumbing and electrical, and certainly our power business in the quarter, you know, all drove significant gains as it relates to that performance. And that's a little bit of a change as we've seen in some of the areas around appliances, where it's a little more duress related at this point in time. A similar composition, as I mentioned, for the last quarter, and we look to see a very similar performance in 2026.

Speaker #11: The dynamic of that was a little bit different, as Ted alluded to, around kind of the maintenance and repair. So you think of plumbing and electrical, and certainly our power business, in the quarter.

Speaker #11: All drove significant gains as it relates to that performance. And that's a little bit of a change, as we've seen in some of the areas around appliances where it's a little more duress-related at this point in time.

Speaker #11: But a similar composition, as I mentioned, for the last quarter, and we looked to see a very similar performance in 2026. Okay, great. Then the follow-up I had is just—I’m also looking at two feet of snow out my window, as Zach mentioned.

Steven Zaccone: Okay, great. The follow-up I had is just, I'm also looking at 2 feet of snow out my window, as Zach mentioned. Should we expect any differences like Q1 comps versus Q2? You know, just being mindful, in fact, has snow caused any sort of disruption? Also, you know, where we've had this prolonged winter, can that sometimes lead to a later start to spring in certain markets?

Speaker #11: Should we expect any differences like first quarter comps versus second quarter? Just being mindful of the fact, has snow caused any sort of disruption?

Speaker #11: And then also, where we've had this prolonged winter, can that sometimes lead to a later start to spring in certain markets?

Speaker #4: All of the above. Steven, I would say again, as Richard said, we're looking for back half comps to be stronger than the first half. And that's really more of a normalized— we don't plan for storms, but in the normal case, there's storms in your base.

Ted Decker: All the above. Steven, I would say, you know, again, as Richard said, we're looking for back half comps to be stronger than the first half, and that's really more of a normalized. You know, we don't plan for storms, but in the normal case, there's storms in your base. The timing of spring, you're right. When you have a really rough winter in the north, you know, you get a lot of landscape damage and roofing and gutters, and all those things need to be repaired, and that will be helpful for Q1.

Speaker #4: The timing of spring, you're right. When you have a really rough winter in the north, you get a lot of landscape damage and roofing and gutters and all those things will be need to be repaired.

Speaker #4: And that will be helpful for Q1. But then, if you obviously get a cold late spring, then that pushes—we’ve talked about the bathtub effect for years.

Ted Decker: If you know, obviously get a cold, late spring, then that pushes, you know, we've talked about the bathtub effect for years, and that pushes the core spring business into Q2. Don't have a crystal ball at this point on how spring is gonna play out. There will definitely be some damage, repair from all this ice and snow in the north.

Speaker #4: And that pushes the core spring business into Q2. And we don't have a crystal ball at this point on how spring is going to play out.

Speaker #4: But there will definitely be some damage repair from all this ice and snow in the north.

Speaker #11: Fair enough. Thanks very much.

Speaker #13: Christine, we have time for one more question.

Steven Zaccone: Fair enough. Thanks very much.

Speaker #1: Thank you. Our final question comes from the line of Jihan Ma with Bernstein. Please proceed with your question.

Isabel Janci: Christine, we have time for one more question.

Operator: Thank you. Our final question comes from the line of Zhihan Ma with Bernstein. Please proceed with your question.

Speaker #13: Hi. Thank you. I'll ask go. So just one quick clarification on the big ticket side of things. Can you talk about the big ticket discretionary projects?

Zhihan Ma: Hi, thank you. I'll ask my one and follow-up in one go. Just one quick clarification on the big ticket side of things. Can you talk about the big ticket discretionary projects, how sales trends are trending there, and are you seeing any improvement? Secondly, just quickly on inventory up about 10% year-over-year. Can you talk about how much of that is driven by GMS versus the cost going up? Is there any underlying increase in the inventory buildup as well? Thank you.

Zhen Zhang Ma: Hi, thank you. I'll ask my one and follow-up in one go. Just one quick clarification on the big ticket side of things. Can you talk about the big ticket discretionary projects, how sales trends are trending there, and are you seeing any improvement? Secondly, just quickly on inventory up about 10% year-over-year. Can you talk about how much of that is driven by GMS versus the cost going up? Is there any underlying increase in the inventory buildup as well? Thank you.

Speaker #13: How sales trends are trending there? And are you seeing any improvements? And secondly, just quickly on inventory ups. About 10% year over year. Can you talk about how much of that is driven by GMS versus the cost going up?

Speaker #13: Is there any underlying increase in the inventory build-up as well? Thank you.

Speaker #4: And I'll take the big ticket question. That's really the telltale for us of when we think the demand profile is going to change for the upside.

Ted Decker: I'll take the big ticket question. That's really the telltale for us of when we think the demand profile is going to change for the upside, and we still have not seen that. You've heard us consistently now saying, you know, things are improving. Our comp clearly improved, a positive comp in 2025, but we have not seen the increase in big ticket, and that will be a telltale for a turn in the market. Richard, you can cover inventory.

Speaker #4: And we still have not seen that. You've heard us consistently now saying things are improving. Our comp clearly improved a positive comp in 2025.

Speaker #4: But we have not seen the increase in big ticket, and that will be a telltale for a turn in the market. And then, Richard, you can cover inventory.

Speaker #12: Sure. Inventory is more of a year-over-year dynamic rather than a sequential quarter dynamic. The increase in inventory year-over-year primarily reflects the addition of GMS's inventory onto our balance sheet.

Billy Bastek: Sure. Inventory is more of a year-over-year dynamic rather than a sequential quarter dynamic. The increase in inventory year-over-year primarily reflects the addition of GMS's inventory onto our balance sheet. It also reflects higher costs of inventory, reflecting tariffs, and then some year-over-year increase in inventory levels as we leaned into our accelerated delivery speed through the year. We think our in-stocks and our inventory position are in great shape, and we feel fantastic about how we're positioned for 2026.

Speaker #12: It also reflects higher costs of inventory reflecting tariffs. And in some year-over-year increase in inventory levels, as we leaned into our accelerated delivery speed, through the year, we think our in-stocks and our inventory position are in great shape.

Speaker #12: And we feel fantastic about how we're positioned for 2026.

Speaker #13: Great. Thank you so much.

Speaker #1: Ms. Jancy, I'd like to turn the floor back over to you for closing comments.

Zhihan Ma: Great. Thank you so much.

Zhen Zhang Ma: Great. Thank you so much.

Operator: Miss Janci, I'd like to turn the floor back over to you for closing comments.

Speaker #13: Thank you, Christine. And thank you, everybody, for joining us today. We look forward to speaking with you on our first quarter earnings call in May.

Isabel Janci: Thank you, Christine, and thank you, everybody, for joining us today. We look forward to speaking with you on our Q1 earnings call in May.

Speaker #1: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Q4 2025 The Home Depot Inc Earnings Call

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