Home Depot Posted Its Strongest Comp Since 2022. Customer Visits Still Fell.

Home Depot reported second quarter sales of $47.861 billion on Tuesday, an increase of $2.6 billion or 5.7% from the same quarter last year. Comparable sales rose 1.7% companywide and 1.3% in the U.S. Net earnings were $4.766 billion, or $4.79 per diluted share, against $4.58 a year earlier, and adjusted diluted earnings per share came to $4.92 versus $4.68. The company reaffirmed its fiscal 2026 guidance. Chief Financial Officer Richard McPhail said in the release that results exceeded expectations, with broad-based demand as “customers continued to engage in smaller projects.”

That qualifier is the story. McPhail told CNBC the company continues to operate in what he calls “frozen housing market conditions,” and that the quarter produced the highest comparable sales figure Home Depot has posted since the third quarter of fiscal 2022. He described a customer who is financially capable and increasingly cautious as the job grows, telling CNBC that shoppers have said they have the means to spend and are hesitant, citing worry about inflation, fuel costs, and general uncertainty. He said the company has still not seen consumers return to big projects.

The transaction data shows what that looks like in a basket. Comparable average ticket rose 2.8% to $92.50 while comparable customer transactions fell 1.0%, and total customer transactions declined 0.8% to 443.2 million. Home Depot notes that both measures exclude HD Supply and SRS. The company’s best comparable sales result in nearly four years arrived with fewer visits than the year before, which means the growth came from basket size and not from traffic. Suppliers building fall volume forecasts off dollar growth at any large retailer should confirm that units are moving with the dollars.

A One-Time Refund Explains Most Of The Gross Margin Line

Gross margin came in at 33.7%, up from 33.4% a year earlier, an increase of roughly 25 basis points. McPhail told analysts Home Depot received $730 million in IEEPA tariff refunds during the quarter, which he described as the vast majority of what the company expects to collect. Of that, $685 million reduced cost of goods sold on products already sold, and the remaining $45 million sits in inventory. He put the refund’s benefit to quarterly gross margin at approximately 145 basis points, partly offset by about 60 basis points of unplanned costs tied to fuel, energy, and other product inputs. That leaves a net benefit near 85 basis points. A further 60 basis points of mix drag from the GMS and Mingledorff’s acquisitions brought the reported increase down to about 25.

Home Depot expects the refunds to be fully offset by those cost pressures over the year, which is why it reaffirmed guidance after a quarter that beat its own expectations. McPhail said the timing of the refunds may shift results between the second and third quarters, and that fourth quarter gross margin should land roughly flat against last year. He told CNBC the refunds allow the company to maintain value despite cost pressure elsewhere. Operating margin still declined to 14.3% from 14.5%, with selling, general and administrative expenses up 8.5% to $8.424 billion against sales growth of 5.7%.

The Housing Market Has Not Cleared

The conditions McPhail describes are visible in the housing data. The National Association of Realtors reported July existing-home sales at a seasonally adjusted annual rate of 4.06 million, down 1.7% from June but up 0.7% from a year earlier, with year-to-date sales running 2.4% ahead of 2025. What has not moved is supply or price. Inventory stood at 1.54 million units, a 4.6-month supply unchanged from June and from July of last year, and the median existing-home price rose 2.0% to $434,100, the 37th consecutive month of year-over-year increases.

Affordability is not the binding constraint it was. Freddie Mac put the average 30-year fixed mortgage rate at 6.67% as of August 13, down from 6.69% the prior week and up from 6.58% a year earlier, and chief economist Sam Khater said affordability has improved from a year ago. Owners holding appreciated equity in a market that will not clear improve the house they have, in increments small enough to skip financing. Home Depot is spending into that environment regardless, launching Express Delivery nationwide on Tuesday with tens of thousands of products available in three hours or less for a flat fee and no membership required.

Walmart Reports Thursday With The Refund Question Open

Walmart releases second quarter fiscal 2027 results Thursday at 6 a.m. Central, with President and Chief Executive Officer John Furner and Chief Financial Officer John David Rainey hosting the call an hour later. Rainey told analysts in May that the maximum recovery available to Walmart as importer of record is less than half of one percent of annual U.S. sales, without specifying which sales base he meant. Measured against the $482.975 billion Walmart U.S. reported for fiscal 2026, that implies a ceiling near $2.4 billion. Retail Dive and CFO Dive reported his statement that the company would “definitely bias and try to prioritize” price investment with the money, and that Walmart’s guidance excludes any recovery. Walmart has not since disclosed how much it has received or when.

Two things in Home Depot’s print are worth carrying into Thursday. The first is that a gross margin line can move on a one-time recovery of duties already paid, so suppliers reading Walmart’s rate as a proxy for cost headroom heading into fall joint business planning should ask what sits inside it before treating it as room. The second is the demand pattern. A peer retailer produced its strongest comparable sales result in years on larger baskets and fewer trips, from customers who told it they can spend and are choosing smaller jobs.

The two Walmart segments read the refund differently. Recoveries go to the importer of record, so any Walmart recovery belongs to Walmart, and 1P suppliers should expect it to surface as movement on shelf prices, not as anything returned through cost. Marketplace sellers who imported under their own name file and collect on their own account, with nothing arriving through Walmart. What reaches 3P sellers is competitive: price investment on first-party items sets the number a competing listing has to answer.

Lowe’s reports Wednesday morning, putting three prints on the board in three days. Home Depot has already collected the refunds it expects and told the market that benefit disappears before the year ends, leaving the back half to run on the underlying business against full-year gross margin guidance of approximately 33.1%.

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