HOME DEPOT, INC.

The Home Depot, Inc. is the world's largest home improvement retailer based on net sales for fiscal 2025, operating in a highly competitive, highly fragmented, and evolving industry. The company faces competition from a variety of retailers, including traditional brick-and-mortar, multichannel, and exclusively online entities, as well as from suppliers, service providers, distributors, and manufacturers. The industry is subject to seasonal influences, with the highest volume of sales occurring in the second fiscal quarter as the company moves into the spring season in the regions in which it operates.

The Home Depot's primary competitors include other home improvement retailers; local, regional and national hardware stores; electrical, plumbing and building materials supply houses; lumber yards; specialty design stores; showrooms; discount stores; paint stores; specialty and mass digital retailers; warehouse clubs; MRO distributors; national and local wholesale supply distributors; home décor retailers; and providers of home improvement services and tool and equipment rental. The company competes primarily based on customer experience, price, quality, product availability, assortment, innovation, and delivery options and capabilities. The company's distinct competitive advantages include its brand, excellent customer service, product authority in home improvement, knowledgeable associates and culture, scale, premier real estate portfolio, digital and interconnected experience, supply chain network, and deep relationships with Pros.

The Home Depot generates revenue through the sale of a wide assortment of home improvement products, building materials, lawn and garden products, décor products, and facilities MRO products, both in stores and online. The company also provides a number of services, including home improvement installation services and tool and equipment rental. The company serves two primary customer groups: consumers (including both DIY and DIFM customers) and Pros (professional renovators, general contractors, homebuilders, maintenance professionals, and specialty tradespeople). The company's business model is primarily transactional, with revenue recognized at the time the customer takes possession of merchandise or when a service is performed.

A typical Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both national brand name and proprietary products, across the following merchandising departments: Appliances, Bath, Building Materials, Electrical, Flooring, Hardware, Indoor Garden, Kitchen & Blinds, Lighting, Lumber, Millwork, Outdoor Garden, Paint, Plumbing, Power, and Storage & Organization. The company's online product offerings complement its stores by serving as an extended aisle, offering a significantly broader product assortment through its mobile applications and websites. The company also provides a number of services, including installation services for DIY and DIFM customers, and tool and equipment rentals at many locations.

Through its subsidiary SRS, which includes the acquired GMS, the company is a leading specialty trade distributor of roofing and building products, interior and construction products, landscape supplies, and pool supplies. SRS is organized as four different lines of business: roofing and building products, interior and construction products, landscape, and pool. The company also provides MRO products and related value-added services to multifamily, hospitality, healthcare, and government housing facilities, among others, primarily through its subsidiary HD Supply.

In fiscal 2024, the company acquired SRS, a leading residential specialty trade distribution company. In fiscal 2025, SRS completed the acquisition of GMS, a leading distributor of specialty building products, including drywall, ceilings, steel framing and other complementary construction products. In fiscal 2023, the company initiated a plan to open approximately 80 new stores over a five-year period, and in fiscal 2025, it opened 12 new stores. The company also continued to invest in its supply chain network, digital capabilities, and store experience.

For fiscal 2025, the company reported net sales of $164.7 billion ¹ and net earnings of $14.2 billion ², or $14.23 per diluted share ³. Net sales increased $5.2 billion, or 3.2%, compared to fiscal 2024 ⁴. The company generated $16.3 billion of cash flow from operations ⁵ and returned $9.2 billion to shareholders in the form of cash dividends ⁶.

However, the company plans to invest approximately $4 billion back into its business in the form of capital expenditures in fiscal 2026, in line with its expectation of approximately 2.5% of projected fiscal 2026 net sales ⁷.

A key growth vector is the expansion of the store base. In fiscal 2023, the company initiated a plan to open approximately 80 new stores over a five-year period, and in fiscal 2025, it opened 12 new stores. The company expects to complete this goal of approximately 80 new stores in fiscal 2027, after which point it plans to open approximately 15 to 20 new stores per year. These new stores are intended to relieve pressure at existing high-volume stores and add capacity in areas with less store coverage.

Another major growth vector is the expansion of the company's capabilities to serve Pro customers, particularly through the SRS and GMS acquisitions. The company believes the GMS acquisition will enhance SRS's position as a leading multi-category building materials distributor, bringing differentiated capabilities, product categories and customer relationships that are highly complementary to SRS's existing business. The company is also investing in differentiated capabilities for Pros, including differentiated fulfillment options, preferred pricing, additional trade credit offerings, more convenient locations and showroom space, and technology tools designed to streamline order management and project planning and management.

The company's gross profit margin was 33.3% in fiscal 2025 ⁸ compared to 33.4% in fiscal 2024 ⁹. The decrease in gross profit margin reflects the inclusion of SRS and GMS in the consolidated results, partially offset by lower shrink and certain supply chain benefits within the Primary segment. SG&A as a percent of net sales was 18.6% in fiscal 2025 ¹⁰ compared to 18.0% in fiscal 2024 ¹¹, which primarily reflects higher payroll and related costs along with the impact of a non-recurring legal-related benefit recognized during fiscal 2024 within the Primary segment. The company continues to focus on driving productivity throughout the business, including by leveraging technology to drive efficiency in freight flow management, supply chain optimization, and streamlining central processes.

The company's supply chain includes multiple distribution center platforms in the U.S., Canada, and Mexico, including rapid deployment centers, stocking distribution centers, bulk distribution centers, FDCs, and direct fulfillment centers. The company has invested to further automate and mechanize its rapid deployment center network and has enhanced its supply chain network with expanded fulfillment facilities. The company is deploying a new delivery method called FDC Relay, which leverages existing FDCs to enhance performance in current FDC markets and broaden reach across a greater number of markets. The company will continue to invest in its supply chain network as needed to support its business.

In fiscal 2025, the company invested $3.7 billion in capital expenditures ¹² across initiatives supporting its strategy. The company plans to invest approximately $4 billion in capital expenditures in fiscal 2026 ¹³. In February 2026, the company announced a 1.3% increase in its quarterly cash dividend from $2.30 to $2.33 per share ¹⁴. The company paused share repurchases in March 2024 and does not have plans to resume share repurchases in fiscal 2026 as it seeks to reduce its outstanding debt. As of February 1, 2026, approximately $11.7 billion of the $15.0 billion share repurchase authorization remained available ¹⁵.

The company faces headwinds from a persisting high interest rate environment that has impacted housing affordability and contributed to historically low levels of housing turnover, which has reduced demand for projects and other purchases associated with buying and selling a home. The company also faces risks from tariffs and other trade policy matters, noting that it experienced increased costs as a result of tariffs in fiscal 2025. The company cannot predict with certainty the ultimate impact of tariffs on its business in future periods.

The company's comparable sales results reflect customer engagement with smaller home improvement projects, which was offset by the impact of continued macroeconomic uncertainties and other macroeconomic factors, including a persisting high interest rate environment, that continue to pressure broader home improvement demand. The company also faces risks from foreign currency exchange rate fluctuations, noting that a stronger U.S. dollar compared to fiscal 2024 negatively impacted net sales by $307 million in fiscal 2025 ¹⁶.

The company faces significant risks from adverse conditions in the housing and home improvement markets, as a persisting high interest rate environment has impacted housing affordability and contributed to historically low levels of housing turnover, reducing demand for projects. The company is also exposed to risks from tariffs and trade policy matters, having experienced increased costs as a result of tariffs in fiscal 2025, and cannot predict their ultimate impact. The company's business is highly competitive and evolving, with online and digital capabilities facilitating competitive entry and price transparency. The company's success depends on its ability to attract, develop, and retain highly qualified associates, and it has faced challenges in recruiting and retaining associates due to wage pressure. The company is also subject to risks from disruptions in its supply chain and technology infrastructure, including cybersecurity threats, which could impair its ability to meet customer demand and result in lost sales and increased costs.

Management's message to shareholders emphasizes the company's focus on leveraging its distinct competitive advantages to take advantage of significant growth opportunities in the highly fragmented markets in which it operates. The strategic priorities for the period ahead are: driving the core and culture by supporting associates to deliver the best customer experience; delivering a frictionless interconnected customer experience regardless of whether customers choose to shop in-store or through digital properties; and winning with Pros through a differentiated value proposition and ecosystem of capabilities. Management also highlighted the company's disciplined approach to capital allocation, which prioritizes reinvesting in the business to drive growth, paying a quarterly dividend, and then returning excess cash to shareholders through share repurchases. The company announced a 1.3% increase in its quarterly cash dividend from $2.30 to $2.33 per share ¹⁷ in February 2026.