Home Depot (NYSE:HD) Chief Financial Officer Richard McPhail said the home improvement demand backdrop softened through 2025 as consumer confidence drifted lower amid uncertainty, inflation concerns, geopolitical events, and fears of job loss. Speaking at JPMorgan’s 12th Annual Retail Round Up Forum, McPhail said customers cited uncertainty as “the largest factor keeping them back from engaging in larger home improvement projects,” even as the company posted “our fifth consecutive quarter of positive comps in the United States” in the fourth quarter of 2025.
Macro conditions and housing “frozen”
McPhail pointed to private residential fixed investment (PFRI) as a key industry proxy, noting that after decelerating while still positive in 2024, PFRI turned negative year over year in 2025 and continued to weaken. He also described U.S. housing activity as “frozen,” arguing that existing home sales and turnover remain unusually depressed.
While McPhail said Home Depot is not immune to housing cycles, he argued that the company has begun to outperform more measurably as 2025 progressed and said management expects to outperform the market in 2026.
Big-ticket projects restrained by uncertainty
Asked whether uncertainty is weighing more heavily on larger projects, McPhail said those projects have not yet recovered and cited pressure in categories including kitchen, flooring, and lighting. He emphasized that the constraint is not necessarily customer balance sheets.
“The customer, particularly the homeowner, their financial position is solid and frankly better than it’s ever been pre-COVID,” McPhail said, pointing to what he described as 80% to 90% increases in home equity values over the last six years, full employment, and income growth. Still, he said customers report reluctance to commit to major work because “it just doesn’t feel like the right time.”
Guidance range, tax stimulus, fuel, and tariffs
On fiscal dynamics, McPhail said the company was “still watching” the impact of tax stimulus and reiterated that Home Depot does not comment on intra-quarter trends. He said the company’s initial guidance for the year assumed comparable sales between flat and up 2%, reflecting a balance of possible headwinds and tailwinds.
McPhail said that, in a simplified scenario where all tax stimulus flowed to consumption and Home Depot captured its share, it could add “upwards of half a point of comp to the good,” but he highlighted “countervailing forces,” including continued pressure in PFRI.
On energy costs, McPhail acknowledged fuel as an important operational input and said sharp swings could affect the business, but argued that Home Depot’s supply chain agility—built in part during the COVID period—positions it to mitigate impacts. “We’ve proven the ability to protect our P&L,” he said, while noting the environment is fluid.
Regarding tariffs and pricing, McPhail said retail price actions persisted longer than some expected, with adjustments occurring late in 2025 and into early 2026. He said he expects the year-over-year pricing dynamic to be “completed through the first half of 2026.” On lower tariff rates, he cautioned against making “long-term permanent assumptions,” framing the impact as a market-wide issue where outcomes depend on how all participants respond to broad-based cost relief or pressure.
Pro strategy and an expanded addressable market
McPhail spent much of the discussion on the company’s long-term push to deepen penetration with professional customers. He said Home Depot operates in a $1.2 trillion addressable market, up from $1.1 trillion previously, and attributed the expansion to the announced acquisition of an HVAC equipment distributor (Mingledorff’s), which added HVAC equipment and parts distribution to the company’s total addressable market.
McPhail said the Pro opportunity totals roughly $700 billion, but emphasized that winning requires shifting from a “cash and carry world” to a service-oriented model, including job-site delivery, outside sales, trade credit, and more flexible order management. He said Home Depot has scaled a delivery and distribution footprint that includes:
- More than 2,350 stores in North America
- About 1,250 wholesale distribution branches with the addition of SRS and GMS
- More than 100 HD Supply branches serving multi-family sites
- 17 flatbed distribution centers, 20 direct fulfillment centers, and roughly 150 market delivery operations
McPhail said the company is “exceptionally early” in its vision of becoming the “most trusted partner to every Pro in the United States,” adding, “We think we have the right to win. We don’t yet have the ability to win, which is why we’re building these capabilities.”
On M&A, he said acquisitions must clear a “very high bar,” requiring strategic fit, strong financial performance, and cultural alignment. He also described opportunities to grow organically, including leveraging new capabilities opened by the HVAC equipment distribution channel to expand parts distribution over time.
Margins, ROIC, and AI-enabled execution
McPhail also addressed profitability and returns as the company invests in its Pro ecosystem. In a “market recovery case,” he said Home Depot targets 4% to 5% comparable sales growth, 5% to 6% total sales growth including new stores and branches, steady gross margin, operating expense leverage, and “very high single-digit EPS growth,” with bottom-line growth faster than top-line growth.
He said recent margin dynamics have included mix impacts from acquisitions such as SRS and wage investments made during 2022 retention pressures. On returns, McPhail said ROIC has been pressured by market softness and investment but is expected to “move up and to the right from this point” as the market recovers and investments mature. Responding to a question about distribution economics, he characterized wholesale distribution as “a highly rational market,” cited faster ROIC acceleration for new SRS branches versus new stores due to a more capital-light model, and said he expects the company to improve distribution margins through scale and “productivity driven by AI.”
McPhail also pointed to AI initiatives aimed at improving store execution and customer service, including equipping associates with AI-enabled product knowledge via handheld devices, shifting more operational “tasking” to the Merchandising Execution Team, and offering an online AI tool called “Magic Apron.” He said the company recently hired a new Chief Technology Officer as it leans further into AI-enabled capabilities.
About Home Depot (NYSE:HD)
The Home Depot, Inc (NYSE: HD) is a leading home improvement retailer that operates large-format stores and an integrated online platform offering a broad range of products and services for do-it-yourself consumers, professional contractors and businesses. The company was founded in 1978 by Bernard Marcus and Arthur Blank and is headquartered in Atlanta, Georgia. Since opening its first stores at the end of the 1970s, Home Depot has grown into a multinational retailer known for its orange-branded stores and wide assortment of home improvement merchandise.
Home Depot’s core business includes the sale of building materials, lumber, tools, hardware, appliances, paint, plumbing and electrical supplies, lawn and garden products, and home décor.
