HD · Q1 2025 Earnings
CautiousHome Depot (The)
Reported May 20, 2025
30-second summary
30-second take: Revenue grew 9.4% to $39.86B in Q1, but that was almost entirely SRS-driven — comparable sales fell 0.3% globally with U.S. comps barely positive at +0.2%. Management reaffirmed FY25 guidance (comps +1%, adjusted EPS -2% YoY) but the underlying message was defensive: a sweeping supply-chain restructuring to cap any non-U.S. country at <10% of purchases within 12 months, an explicit commitment to absorb tariff costs rather than raise prices, and acknowledgment that high rates are now a structural — not transitory — drag on big-ticket remodels.
Headline numbers
EPS
Q1 FY2025
$3.56
Revenue
Q1 FY2025
$39.86B
+9.4% YoY
Gross margin
Q1 FY2025
33.8%
Free cash flow
Q1 FY2025
$3.52B
Operating margin
Q1 FY2025
12.9%
Key financials
Q1 FY2025| Metric | Q1 FY2025 | YoY |
|---|---|---|
| Revenue | $39.86B | +9.4% |
| EPS | $3.56 | — |
| Gross margin | 33.8% | — |
| Operating margin | 12.9% | — |
| Free cash flow | $3.52B | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Platform metrics
Q1 FY2025| Segment | Q1 FY2025 |
|---|---|
| Comparable sales | -0.3% |
| U.S. comparable sales | 0.2% |
| Average ticket | $90.71 |
| Customer transactions (millions) | 394.8 |
Profitability
Q1 FY2025| Segment | Q1 FY2025 |
|---|---|
| Adjusted operating margin | 13.2% |
| Operating cash flow | $4.325B |
| Capital expenditures | $806M |
Management tone
The tone shifted from "bullish on home improvement fundamentals" to "confident we're best positioned to win" — a meaningful semantic downshift. Below are the multi-quarter (where available) and intra-call shifts that matter.
Bullishness reframed as relative competitive positioning. Where Ted Decker has historically led with absolute confidence in the home improvement TAM, this quarter's prepared remarks anchored on competitiveness: "We are confident we are best positioned to win." The market-conditions optimism is gone; the share-gain narrative remains. This signals management no longer expects the macro to do the heavy lifting in FY25.
Tariff and geopolitical risk elevated from contextual mention to structural project. Decker disclosed a concrete restructuring target: "we anticipate that 12 months from now, no single country outside of the United States will represent more than 10% of our purchases." That is not contingency planning — that is an active multi-quarter supply-chain rebuild. Combined with the commitment in Q&A to absorb tariff costs rather than pass them through, this is management telling investors that gross margin upside from productivity will be reinvested in price stability and sourcing resilience, not flow to shareholders.
Interest-rate headwind reclassified from transitory to persistent. Billy Bastek's framing — "the higher interest rate environment continues to pressure larger remodeling projects" and explicit reference to "softer engagement in larger discretionary projects where customers typically use financing" — drops the "when rates normalize" framing that has dominated prior commentary. The $50B cumulative deferred home-improvement spend figure cited in Q&A is now a multi-year overhang, not a coiled spring.
EPS guidance required a presentation pivot to stay defensible. Adjusted EPS is guided to decline ~2% YoY, and management chose to highlight that "On a 52-week basis, adjusted diluted earnings per share would be essentially flat compared to fiscal 2024." When a company needs to switch calendar conventions to make the optics work, it tells you the underlying earnings power is weaker than the reaffirmed top-line implies.
Hedging language density is up. "In line with our expectations," "approximately," "essentially flat," "as it stands today" — the call carried the cadence of management hedging confidence intervals rather than projecting them.
Recurring themes management leaned on this quarter:
Risks management surfaced:
Q&A highlights
Michael Lasser · UBS
How is Home Depot approaching tariffs (10-30% on ~50% of sourced goods, blended ~20%) from a pricing standpoint? If absorbing half, ~5% tariff on COGS—will productivity and shrink benefits be used to offset rather than accrue to shareholders?
Over 50% of purchases sourced in U.S. with diversified supplier base. Within 12 months, no single non-U.S. country will represent >10% of purchases. Intends to maintain pricing across portfolio using portfolio approach. Has multiple levers including productivity, supply chain flexibility, and line-structure optimization. Will not see broad-based price increases for customers.
Christopher Horvers · JP Morgan
How would you characterize overall demand environment amid weather noise and CNN effect? Could Q1 uncertainty be understating momentum? With flat existing home sales and high equity/low turnover, shouldn't replacement cycles drive acceleration, especially if inflation picks up?
Macro worst concerns have passed. Recession expectations down, unemployment low, inflation trending toward 2%, home prices rising. However, stubbornly high mortgage rates keep housing turnover at decade lows. Despite high home equity (up 50% since end-2019), consumers doing smaller projects but not larger financed projects due to macro uncertainty and high rates. Net cumulative $50B shortfall in home improvement spend identified.
Simeon Gutman · Morgan Stanley
Comp guidance implies conservative assumptions given April exit near 2%, SRS uplift in Q2, and expected better back half. Is there added caution on housing, or could trends deliver 1.5-2% comps vs. current guidance?
One quarter in; team hit expectations before FX headwinds of $275M. Feel good about Q2 heading but reaffirming guidance as prudent approach. SRS performing ahead expectations across all three verticals (roofing, pool, landscape) with share gains. Trade credit program early days with thousands of accounts onboarded; aiming for millions from millions of pro customers.
Zihan Ma · Bernstein
Inventory up 15% YoY; how much from SRS? Any pull-forward? Positioning for summer and holidays?
Majority of inventory increase from SRS addition to base (not in prior-year balance sheet). Incremental investments made due to gains from speed initiative and supply chain momentum. No pull-forward. In-stock levels as good as ever. All seasonal goods landed well before fiscal year start. Inventory positioned well for Q2 (described as Super Bowl season). Speed and DFC network investments driving strong productivity.
Seth Sigmund · Barclays
What regional performance variations occurred in Q1? Have housing price softening impacts been seen? If home prices weaken, does it matter as much given historically elevated home equity?
A couple of markets saw slight softening but no change in sales associated with it. Weather is dominant regional determinant. No evidence yet of home price changes impacting business. Customer base strong ($110k avg income, 80% homeowners, stock market recovery, wage growth). $100k+ income customer in best shape economically per Morning Consult data.
What to watch into next quarter
Q2 U.S. comp sales: Management hinted at April near +2% — watch whether the spring "Super Bowl" quarter delivers comps above +1.5% on a 13-week basis. Anything below +0.5% puts FY +1.0% comp guidance at risk and forces a cut.
Gross margin trajectory: Q1 came in at 33.8% vs. FY guide of ~33.4%. Watch whether tariff absorption pulls Q2 gross margin below 33.4% — that would confirm the cost-versus-price math management committed to in Q&A is biting.
SRS standalone disclosure: Management has not yet broken out SRS revenue contribution explicitly. Watch for either segment disclosure or a same-store comp framing that isolates SRS impact, especially given organic comps are now near zero.
Pro trade credit account growth: Disclosed thousands of HD core pro accounts onboarded vs. 90,000+ at SRS. Watch for a specific count next quarter — material acceleration would validate the pro ecosystem flywheel; another vague "thousands" answer signals execution lag.
Adjusted EPS calendar framing: Watch whether management drops the "52-week basis essentially flat" language or doubles down. Continued reliance on the alternative framing means underlying EPS is still trending negative.
Supply-chain country concentration: Decker put a 12-month clock on the <10% threshold for any non-U.S. country. Watch for an interim update next quarter — concrete progress reduces tariff-tail risk; silence implies the target was aspirational.
Sources
- Home Depot Q1 FY2025 Press Release, filed 2025-05-20 — https://www.sec.gov/Archives/edgar/data/354950/000035495025000133/hd_exhibit991x05042025.htm
- Home Depot Q1 FY2025 earnings call commentary (Decker, Bastek, McPhail) — as cited in tone and Q&A inputs.
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