Home Depot profit dips as cost inflation outpaces sales growth in Q1
Net earnings fell 4.2% to $3.28bn as cost of sales rose 6%, while CEO Ted Decker highlighted ongoing consumer uncertainty and the strategic integration of SIMPL Automation.
Home Depot reported a 4.2% decline in first-quarter fiscal 2026 net earnings, falling to $3.28bn from $3.43bn in the comparable prior-year period. The US home improvement retailer posted net sales of $41.76bn for the quarter ended 3 May 2026, representing a 4.8% year-on-year increase. However, profitability was weighed down by rising operational costs, with the cost of sales growing at 6% to reach $27.98bn. This expense growth outpaced revenue expansion, compressing gross profit to $13.78bn, a modest rise of just 2.4%.
Diluted earnings per share decreased by 4.3% to $3.30, while adjusted diluted earnings per share dropped to $3.43 from $3.56 a year earlier. Despite the margin pressure, comparable sales edged up 0.6% for the quarter, with US comparable sales advancing 0.4%. The results reflect a challenging environment where top-line growth has not been sufficient to offset the inflationary pressures on input costs.
Home Depot chair, president and CEO Ted Decker stated that the first-quarter results aligned with the company’s expectations. He noted that underlying demand remained relatively consistent with fiscal 2025 levels, despite heightened consumer uncertainty and ongoing housing affordability pressures. Decker also acknowledged the role of associates in maintaining customer service standards during the quarter.
In a move to address operational efficiency, Home Depot completed the acquisition of SIMPL Automation last month. The Massachusetts-based company specialises in automation and technology systems. Home Depot indicated that SIMPL applies engineering and AI technologies to help distribution sites operate faster and more efficiently, supporting the retailer’s broader strategy to increase automation across its supply chain.
The company maintained its full-year fiscal 2026 outlook, forecasting total sales growth of between 2.5% and 4.5%. Comparable sales are expected to grow from flat to 2.0%, with approximately 15 new store openings planned for the fiscal year. Home Depot projects diluted and adjusted diluted earnings per share growth of flat to 4.0%, based on fiscal 2025 base figures of $14.23 and $14.69, respectively.
