By Isnaini Azizah 
The Home Depot on Tuesday reported a fiscal fourth-quarter performance that managed to outpace Wall Street’s expectations for both revenue and earnings, providing a silver lining to a period characterized by a roughly 4% decline in quarterly sales. This performance comes as the world’s largest home improvement retailer continues to grapple with a residential real estate market that executives have described as "frozen," coupled with a discernible shift in consumer behavior as homeowners become increasingly selective with their discretionary spending. While the headline sales figure showed a contraction, the company’s ability to navigate high interest rates and a sluggish housing turnover environment suggests a level of resilience that investors rewarded with a 2% bump in premarket trading.
For the three-month period ending February 1, 2026, the Atlanta-based retailer posted net income of $2.57 billion, or $2.58 per share. This represents a decline from the $3.0 billion, or $3.02 per share, recorded in the same quarter a year prior. Total revenue also saw a dip, falling from $39.70 billion in the year-ago period to the current figure, which nevertheless topped analyst estimates compiled by LSEG. It is important to note that the year-over-year revenue comparison was skewed by the fact that the prior fiscal year (2024) included an additional 53rd week of operations, which contributed approximately $2.5 billion in sales. When adjusting for this calendar anomaly and other one-time factors, the underlying health of the business appeared more stable than the raw percentages might initially suggest.
In an extensive interview with CNBC, Home Depot Chief Financial Officer Richard McPhail provided a candid assessment of the current macroeconomic landscape, noting that the United States has been entrenched in a "frozen housing environment" for nearly three years. This stagnation is largely the result of a "lock-in effect," where homeowners who secured record-low mortgage rates during the pandemic era are hesitant to sell and move into new homes with significantly higher borrowing costs. Despite recent moderations in interest rates—with the average 30-year fixed mortgage rate dipping to 5.99% this week, its lowest level in four years—a "meaningful thaw" has yet to materialize. McPhail highlighted that added pressures over the last twelve months, including a gradual decline in consumer confidence and heightening uncertainty regarding job security and housing affordability, have forced the company to maintain a cautious outlook.
Despite these headwinds, Home Depot chose to stick by the fiscal year forecast it originally shared with investors in December. The company expects total sales growth for the upcoming fiscal year to range between 2.5% and 4.5%, with adjusted earnings per share projected to be anywhere from flat to up 4% compared to the $14.69 earned in the prior fiscal year. Crucially, comparable sales growth—a vital metric that excludes the impact of store openings and closures—is expected to range from flat to up 2%. This guidance suggests that while the company does not anticipate a rapid rebound in the housing market, it expects to maintain its market share and perhaps even gain ground as competitors struggle with the same industry-wide laggardness.
A granular look at the fourth-quarter data reveals a complex picture of consumer activity. While store transactions across Home Depot’s physical and digital platforms dropped by 1.6% year over year, the average ticket price rose by 2.4%. This indicates that while customers are visiting less frequently, they are spending more when they do engage. Perhaps most encouraging for the retailer was the 1.3% increase in "big-ticket" purchases, defined as transactions exceeding $1,000. These larger orders often represent essential maintenance or mid-sized renovation projects, and their growth suggests that a segment of the population is still willing to invest in their homes despite the broader economic chill. McPhail noted that some of this increase reflects "modest" price hikes across various categories, though the company has been strategic in where it passes costs on to the consumer.
The broader strategy for Home Depot has increasingly pivoted toward the professional market ("Pro") as a way to offset the volatility of the "do-it-yourself" (DIY) segment. DIY buyers, who are often more sensitive to inflation and interest rate fluctuations, have notably cut back on discretionary projects. In contrast, professional contractors, roofers, and landscapers often have backlogs of work that provide a more stable revenue stream. To capture this lucrative market, Home Depot has engaged in aggressive M&A activity. Last year, the company completed the $18.25 billion acquisition of SRS Distribution, a leading specialty distributor of roofing, landscaping, and pool products. This was followed by the $4.3 billion purchase of GMS, a specialty building products distributor. These acquisitions are part of a multi-year effort to build a comprehensive ecosystem for the Pro customer, offering not just products but logistics and credit solutions tailored to large-scale projects. McPhail confirmed that Pro sales outperformed DIY sales during the fourth quarter, reinforcing the company’s thesis that the professional segment is currently the primary engine of growth.
The operational landscape for Home Depot is also being reshaped by internal restructuring and shifting labor policies. In late January, the company announced the layoff of approximately 800 employees, a move aimed at streamlining corporate functions and reducing overhead. Simultaneously, the retailer joined a growing list of major corporations mandating a five-day-a-week return-to-office policy for corporate staff. These moves reflect a broader trend in the retail sector toward operational efficiency and a "back-to-basics" approach as the era of easy pandemic-era growth fades into the rearview mirror. Despite these cuts, the company remains committed to physical expansion, having opened 12 new stores in fiscal 2025 with plans to add 15 more in the coming year.
External factors, particularly trade policy and tariffs, remain a significant wildcard for the retailer’s future margins. The home improvement industry was recently jolted by a Supreme Court ruling that declared certain Trump-era tariffs illegal. However, the relief for retailers may be short-lived, as President Donald Trump recently proposed an across-the-board global tariff of 15% to replace the previous duty structure. Home Depot, which sources more than half of its goods from within the United States, is arguably better positioned than many of its competitors to weather a trade war. McPhail emphasized that the company has been proactively diversifying its supply chain, ensuring that no single country outside of the U.S. accounts for more than 10% of its total purchases. "We are still in the middle of our analysis following the Supreme Court ruling," McPhail stated, adding that the company is "as well-positioned as anyone" to manage through the evolving regulatory and trade environment.
Investor sentiment remains cautiously optimistic as the company enters its most critical period: the spring selling season. Often referred to as the "Super Bowl" of home improvement, the spring months typically see a surge in outdoor projects, gardening, and home maintenance. If mortgage rates continue their downward trajectory toward the 5.5% to 5.75% range, analysts believe it could trigger a release of pent-up demand in the housing market, which would serve as a massive tailwind for Home Depot. In a gesture of confidence toward its shareholders, the company’s board of directors announced a 1.3% increase in its quarterly dividend to $2.33 per share, payable next month. This marks a continued commitment to returning value to investors even during periods of relative stagnation.
As of the market close on Monday, Home Depot shares were down about 2% over the past year, significantly underperforming the S&P 500’s 14% gain. However, the stock is up roughly 10% year-to-date, suggesting that the market is beginning to price in a potential recovery. The company’s ability to beat earnings estimates after three consecutive quarters of misses has restored some credibility to its management team’s ability to forecast in a volatile environment. The path forward for Home Depot will depend heavily on the resilience of the American consumer and the Federal Reserve’s trajectory regarding interest rates. While the "frozen" housing market remains a formidable obstacle, Home Depot’s strategic shift toward the professional segment and its disciplined approach to supply chain management provide a robust framework for navigating the uncertainties of 2026. As the company waits for a "meaningful thaw," it continues to reinforce its foundations, preparing for the eventual moment when the housing market—and the massive home improvement demand it generates—finally begins to move again.