Home Depot's Q1 2026: Unpacking Contradictions on Market Share, Inflation, and SRS Integration

Market share assumptions and growth expectations, inflation and consumer behavior, shrink improvements, inventory management and demand forecasting, and the integration and impact of SRS are the key contradictions discussed in The Home Depot's latest 2026Q1 earnings call.



Sales Performance and Consumer Behavior:
- Home Depot reported sales of $39.9 billion for the first quarter, up 9.4% from the same period last year, despite a 0.3% decline in same-store sales.
- The increase was driven by a greater engagement in smaller home improvement projects and participation in spring events, despite unfavorable weather and foreign exchange rate pressures.

Supply Chain Diversification and Cost Management:
- More than 50% of Home Depot's purchases are now sourced in the United States, with a strategy to ensure no single country outside the U.S. represents more than 10% of purchases in the future.
- This diversification was implemented to mitigate supply chain risks and reduce costs, as well as to navigate foreign exchange rate volatility.

Earnings and Operating Margins:
- Adjusted diluted earnings per share were $3.56 in the first quarter, a decrease of approximately 3% compared to the previous year, reflecting a gross margin of 33.8%.
- Pressures from foreign exchange rates and other factors contributed to the reduction in margins, though strategic cost management efforts are expected to sustain long-term profitability.

Digital Engagement and Market Share Capture:
- Online sales leveraging digital platforms increased approximately 8%, with a focus on enhancing the delivery speed experience.
- The company's Magic Apron generative AI tool and expanded relationship with BEHR for exclusive KILZ products are driving online conversion growth and strengthening market position.