Home Depot Q2 Earnings Miss Estimates, Comparable Sales Rise Y/Y

The Home Depot Inc. HD has reported second-quarter fiscal 2025 results, wherein both the sales and earnings missed the Zacks Consensus Estimate. However, both metrics improved year over year. Also, comparable sales increased year over year.

HD is confident about its initiatives to strengthen the business. Management highlighted continued momentum in smaller home-improvement projects and reiterated its focus on building the best interconnected experience for customers and growing share, while reaffirming fiscal 2025 guidance.

Detailed Picture of HD’s Q2 Results

Home Depot's adjusted earnings of $4.68 per share increased slightly by 0.2% from $4.67 in the year-ago quarter. However, the bottom line missed the Zacks Consensus Estimate of $4.71 per share.

Net sales increased 4.9% to $45.3 billion from $43.2 billion in the year-ago quarter. However, sales lagged the Zacks Consensus Estimate of $45.5 billion.

Home Depot's comparable sales increased 1% in the reported quarter. The company’s comparable sales in the United States improved 1.4% in the fiscal second quarter. However, unfavorable foreign exchange rates reduced total company comparable sales by about 40 basis points in the quarter. Customer transactions were 446.8 million, down 0.9% year over year. Average ticket improved 1.2% year over year in the quarter under review.

HD’s Costs & Margin Details

In dollar terms, gross profit rose 4.9% year over year to $15.1 billion in the fiscal second quarter. The gross margin was approximately 33.4%, roughly flat year over year. Our model predicted a 10-bps year-over-year decline in the gross margin to 33.3% for the fiscal second quarter.

SG&A expenses of $7.8 billion increased 8.7% from $7.1 billion in the year-ago quarter; as a percentage of sales, SG&A was about 17.1%, up roughly 60 bps year over year.

Operating income was $6.6 billion, up 0.3% year over year, while the operating margin of about 14.5% contracted by roughly 65 bps year over year.

Our model predicted the SG&A expense rate to increase by 50 bps year over year to 17%. Consequently, we anticipated the operating income to increase 1.1% year over year and the operating margin to contract 60 bps to 14.5% for the fiscal second quarter.

HD Stock's Past 3-Month Performance

HD’s Other Financial Updates

Home Depot ended second-quarter fiscal 2025 with cash and cash equivalents of $2.8 billion, long-term debt (excluding current installments) of $45.9 billion and stockholders’ equity of $10.7 billion. For the first six months of fiscal 2025, the company generated $9.0 billion of net cash from operating activities.

What Does HD Plan for FY25?

Management reiterated its sales and earnings per share view for fiscal 2025. Home Depot anticipates sales to increase 2.8% year over year. The company expects comparable sales to increase 1% for the 52 weeks.

HD estimates the gross margin for fiscal 2025 to be 33.4%, with an operating margin of 13%. It expects an adjusted operating margin of 13.4%. HD plans to open 13 stores for fiscal 2025.

Home Depot anticipates earnings per share to decline 3% year over year for fiscal 2025. It expects adjusted earnings per share to fall 2% year over year. The company anticipates capital expenditures to be 2.5% of total sales.

This Zacks Rank #3 (Hold) company’s shares have gained 4.7% in the past three months compared with the industry's 6.5% growth.

Stocks to Consider

Some better-ranked stocks are Somnigroup International Inc. SGI, Williams-Sonoma, Inc. WSM and Torrid Holdings Inc. CURV.

Somnigroup is a bedding company that designs, manufactures, distributes and retails sleep solutions. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Somnigroup’s current financial-year sales and earnings indicates growth of 50.7% and a decline of 0.4%, respectively, from the previous year’s figures. SGI has a trailing four-quarter average earnings surprise of 3.7%.

Williams-Sonoma is a multi-channel specialty retailer of premium-quality home products. It currently carries a Zacks Rank #2. WSM has a trailing four-quarter earnings surprise of 8.8%, on average.

The Zacks Consensus Estimate for Williams-Sonoma’s current fiscal-year sales and earnings indicates growth of 0.1% and a decline of 3%, respectively, from the year-ago numbers.

Torrid Holdings is a direct-to-consumer brand of apparel, intimates and accessories. It currently carries a Zacks Rank of 2.

The Zacks Consensus Estimate for Torrid Holdings’ current fiscal-year sales and earnings indicates a decline of 5.6% and 6.7%, respectively, from the year-ago numbers. CURV has a negative trailing four-quarter earnings surprise of 10.5%, on average.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research