Home Depot, Inc. (HD) Q1 2027 Earnings Call Transcript

Greetings, and welcome to the Home Depot First Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Isabel Jancy. Please go ahead.

Thank you, Christine, and good morning, everyone. Welcome to Home Depot's first quarter 2026 earnings call. Joining us on our call today are Ted Decker, Chair, President, and CEO, Ann Marie Campbell, Senior Executive Vice President, Billy Bastic, Executive Vice President of Merchandising, and Richard McVale, Executive Vice President and Chief Financial Officer. Following our prepared remarks, the call will be open for questions. Questions will be limited to analysts and investors, and as a reminder, please limit yourself to one question with one follow-up. If we were unable to get to your question during the call, please call Investor Relations at 770-384-2387. Before I turn the call over to Ted, let me remind you that today's press release and the presentations made by our executives include forward-looking statements under the federal securities laws, including as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited, to the factors identified in the release, in our most recent annual report on Form 10-K, and in our other filings with the Securities and Exchange Commission. Today's presentation will also include certain non-GAAP measures, including, but not limited, to adjusted operating margin, adjusted diluted earnings per share, and return on invested capital. For a reconciliation of these and other non-GAAP measures to the corresponding GAAP measures, please refer to our earnings press release and our website. Now, let me turn the call over to Ted.

Thank you, Isabelle, and good morning, everyone. Sales for the first quarter were $41.8 billion, an increase of 4.8% from the same period last year. Comp sales increased 0.6% from the same period last year, and comps in the U.S. increased... Adjusted diluted earnings per share were $3.43 in the first year. Our results were in line with our expectations. In the U.S., our northern and western divisions had positive cons as customers engaged in outdoor projects when weather was favorable. In local currency, Mexico had What we saw throughout fiscal 2025, despite greater We're meeting at a high level, and we remain focused on... Until in a moment. I completed the acquisition of Mingledors, the leading wholesale distributor of heating, ventilation, and air conditioning equipment, serving residential and commercial customers through 42 locations in five states. Highly complimentary to SRS's existing business. In addition, Mingeldorf gives... Thank you. We know we have. Now command to fleet. What we are building is unique and not easy.

Thanks, Ted, and good morning, everyone. We continue to focus on elevating the shopping experience across our stores and online by optimizing fulfillment options. To do this, we are simplifying processes in our stores. And to transition more store tasking to a merchandise and execution team. Shopping experience. to deliver a more We're evolving, or sourcing logic, and have begun to route orders to the optimal source And to drive loyalty. Enabling us to complete their delivery on time inside the exact... And complete performance has never. Stop an experience.

It was in line with our expectations. It's been a great engagement. In the first quarter, nine of our 16 merchandising departments posted positive comps. 2.2% and comp transactions decreased. Ticket comp transactions, or those over $1,000, were positive .8. We were pleased with the performance we saw on portable power and patio. However, larger discretionary projects remain During the first quarter, Across many spring-related categories, including live goods. Thank you. For example, we have made significant progress with the Pro Who Paints and continue to see shared gains with this customer. Our expanded assortment of products and partnerships with Bayer and PPC... Combined with improved job site delivery capabilities are helping to remove friction from their Turning to Total Company Online Comp Sales, sales leveraging our digital platforms. Double-digit year-over-year growth driven by our ongoing investments across the country. Delivering the best interconnected experience is a... Thank you. As Ann mentioned, our faster delivery speeds are resonating with customers and driving greater engagement. And while we are pleased with the progress we are making, we remain relentlessly focused on getting better each and every day because we know that as we remove friction from the experience, we see incremental customer engagement. During the first quarter, we hosted our annual Spring Black Friday and Spring Gift Center events and saw strong performance across both events. Our merchants did a fantastic job curating the best products, and we saw strong engagement with our customers. Portable power. We know that demand for cordless outdoor power equipment has never been stronger in our lineup of battery-powered tools across Ryobi, Milwaukee. This quarter, I'm excited to announce that Ram... and the big box retail channel. This product is engineered to withstand the... That's why RAM Board has been the go-to for pros for heavy-duty floor protection for over 25 years. As we look forward to the second quarter, we are ready to continue delivering the best spring assortment across the country. Our live goods look incredible with everything from shoves to a variety of flowers. We're excited about spring breaking across the country, and we remain ready to help our customers with all of our customers. With that, let me turn the call over to Richard.

Thank you, Billy, and good morning. During the first quarter, our total company comps were positive 0.6%, with comps of positive 0.6%. Positive 2% in March, and negative . Comps in the U.S. were positive 0.4% for the quarter, with comps of positive 0.4% for the Current exchange rates positively impacted total company comps by approximately 55 basis points per hour. The first margin was $32,000. Seventy-five basis points. It's a change in mix. Operating expense. Excluding the intangible asset amortization of the quarter, our adjusted operating $13,000,000. Three dollars. Our adjusted dilution $3.40. At the end of the quarter, merchandise inventories were 27.3. Turning to capital allocation, during the first quarter, we invested approximately $845 million back into our business in the form of capital expenditures. And during the quarter, we paid approximately $2.3 billion in dividends to our shareholders. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, Return on invested capital is 25.4%, down from 31.3% in the first quarter of fiscal 2025. Now I will comment on our outlook for fiscal 2026. As you heard from Ted, our performance during the first quarter was in line with our expectations. The underlying demand during the quarter was relatively similar to what we experienced throughout fiscal 2025. As a result, we are reaffirming our fiscal 2026 guidance. We expect to continue to grow our market share and for our comp sales to range between flat to 2% growth, with total sales growth of between approximately 2.5% and 4.5%, reflecting the contribution of the GMS acquisition, new stores, branches, and tuck-in acquisitions. For the year, we expect SRS to deliver mid-single-digit percent organic sales growth. We plan to open approximately 15 new stores in 40 to 50 new SRS locations. Our gross margin is expected to be approximately 33.1%. Further, we expect operating margin of approximately 12.4% to 12.6%, Thank you. An adjusted operating margin of approximately 12.8 to 13%. Our effective tax rate is targeted at approximately 24.3%. We expect net interest expense of approximately $2.3 billion. We expect our diluted earnings per share and adjusted diluted earnings per share to both increase approximately flat to 4% compared to fiscal 2025. We plan to continue investing in our business with capital expenditures of approximately 2.5% of sales for fiscal 2026. We believe that we will continue to grow market share as a result of our competitive advantages and ongoing investments by delivering the best customer experience and home improvement. Thank you for your participation in today's call, and Christine, we are now ready for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Scott Ciccarelli with Truist. Please proceed with your question.

Good morning, guys. Thanks for the info. Well, this may not be an exact science. Is there a way to size up how much of your business is typically exposed to these bigger ticket projects? Because it sounds to me like many of your individual categories are posting positive comps with the big ticket project bucket as the primary drag, but in theory, that bucket continues to shrink over time, so you start to get a mixed benefit. But is there a way to size up the exposure there?

Hey, Scott. We don't disclose that, but as you can imagine, we look at all our transactions in sales by ticket size, you know, zero to $20, $20 to $50, etc., up including over $1,000. And then we also look at items per basket in each of those sales cohorts, and then also breadth of departments that are represented in those baskets. And as you can imagine, the larger baskets with more items in that basket also tend to have a broader number of departments represented. In that basket, if it's a larger project. So that's where we can see clearly that, you know, the large cross-category project is muted. It's a great question on what specifically that represents.

Understood. Okay. Thanks, guys.

Our next question comes from the line of Seth Sigmund with Barclays. Please proceed with your question.

Hey, good morning, everyone. So, if you step back, your business has stabilized in the last couple of quarters. You've moved to slightly positive comps, but it does feel like there are a lot of aspects of demand that are still stuck. So, when you look at existing home sales, those $4 million, HELOCs seem to have plateaued again. Guidance does imply a slight improvement in comps as we move through the year, and I don't think the shape of the year has changed relative to your initial expectations, but how do you think about that and what those drivers could be to get you back to a slightly better comp as you move through the year? Thank you.

We're not looking at a marked improvement in underlying demand. We are looking at a higher comp in the second half of the year, and that is solely driven by a return to normal storm.

Okay, understood. And then, you know, if we think about some of the pro initiatives, with the business up just slightly, it can be difficult to see some of the stories underneath that. So, specifically on the pro. Can you talk about, you know, how are you benchmarking your progress? How are you benchmarking your performance, perhaps across some of the key verticals, to give you confidence that the strategy is working? I know it can be difficult, just given the backdrop is challenging. So how do you guys think about that? Thanks so much.

Well, so maybe it's helpful if I just back up a minute and articulate, you know, what we're doing with Pro and then how we see. Progress. So, you know, we think pro is an enormous opportunity for us. As we've said, it's an addressable market of about $700 billion. And truly, nobody has the scale or the customer reach like the Home Depot to penetrate that market. We already have, as you know, a large pro business and we service. Most pro customers in some way or fashion, so our whole objective here is to simply win more pro business, more products, and more purchase occasions. Our stores for 45-plus years have always serviced that smaller cash-and-carry pro, and larger pros use us for infill and emergency purchases. And we believe we have the right to win more share of wallet with those larger pros as we build out the capabilities to better service their complex purchase needs. So we're focused more on the residential pro in our organic efforts to buy across. And we are gaining traction with these. sales for We have three options in trade credit. And I'd say, you know, one... Again, this quarter in the highest One way that we... Success we're having as we build out these capabilities.

Okay, thanks, Ted.

Our next question comes from the line of Christopher Horvors with J.P. Morgan. Please proceed with your question.

Thanks. Good morning, everybody. I wanted to follow up on the cadence as well. You know, how do you think about weather as an impact in the first quarter, particularly April? There was a lot of precipitation in the north on the weekends, which I know that tends to hurt the seasonal business, and you typically talk about the bathtub effect. So could you maybe frame that out? And then also, do you think about the storm headwinds from the back half of last year? You know, to what extent did that have any impact in the first quarter? And would you expect that to go away in the second quarter?

Yeah, thanks, Chris. It's Billy. I'll talk for a little bit about what we've seen so far in spring, and as Richard covered in the comp cadence, weather's always a variable throughout the first quarter. We saw great engagement, as I mentioned in my prepared remarks. You know, in the West in February, March, and certainly in the South in March as well, as we got into April, we really saw the same type of engagement into April, and then the last two weeks we saw, you know, a different weather pattern year over year. But we saw great engagement across, you know, all of our spring categories. I mentioned, you know, we had positive comps in nine categories overall. And then as we turned the corner into May and saw, you know, much more favorable weather, if you will, or consistent weather, particularly in the north, we saw that same engagement through the first couple weeks of May. So really pleased with some of the performance there. And as for storms, as you mentioned, we did have 56 basis points of impact in Q1, but that'll dissipate throughout the balance of the year, and, you know, we'll see, you know, what that brings for us, the balance of the year, but that'll continue to be less of an impact, obviously, as we get through the balance of the year.

Understood. And you guys are all asked to be constant economists here. The consumer had stimulus. I was curious if you thought how that impacted your business and anything in the business that you're looking at today to saying that, well, the consumer looks a bit shakier because of higher oil prices or whatever, some sort of change in project demand. And then on a related question, how do you think about the symmetry of higher rates, i.e., you know, if we stay at these level of mortgage rates, do you think it's actually punitive to demand in your category, or do you think maybe, you know, given that we're at 40-year lows on existing home sales, it's not – maybe it defers the release in the category, but it doesn't necessarily deteriorate demand going forward. Thanks so much.

Yeah, Chris, we are probably all spending too much time in economics. In the home improvement industry these days. But, you know, I'd start again by just reiterating, you know, our results were in line with our expectations. And the underlying demand was relatively similar to what we saw throughout 2025. So that suggests that, you know, our consumer has been remarkably resilient, has been a lot thrown at them. But if you look at PCE growth year over year, you know, that was similar in the first quarter, that was similar to all of last year. Employment is hanging in there. Wage growth has been reasonably strong. And you look at our core customer, they're probably amongst the healthiest of all consumers, so they tend to own their homes. They did have that 50% value pop in the value of their homes over the past several years. And their portfolios of equities have also improved. So our customer... Seems to be in reasonably good shape. They're engaged, as Billy just spoke to. While maybe not the large project, they are engaged across more departments in Q1, strengthening than we had seen previously. And again, the main thing is just this uncertainty that's holding them back for taking on large projects. And then you add to that, as you said, with the higher rates, you know. Housing turnovers remain low. Industry is not expecting a lot of growth in housing turnover this year, and new construction starts in sales are also trending down. But we look at, you know. Thank you. data or the PFRI data, each of which were negative, you know, are being up. What you just said is true. If it's higher for longer on rates...

Thank you. Have a great rest of spring.

Our next question comes from the line of Michael Lasser with UBS. Please proceed with your question.

Good morning. Thank you so much for taking my question. Had you given any consideration to lowering your guidance in light of the rise in interest rates? As well as the rise in energy prices, should we be thinking about the low end of your outlook for the year? And can you clarify your comments around the performance of the business in May? We're all holding our collective breath to trying to understand real time what's going on with the consumer in light of all these well-documented challenges and whether that's starting to weigh on the overall spending environment. Thank you very much.

Billy, why don't you talk about May? Yeah, Michael, thanks, and then Richard will follow back up. Yeah, as I mentioned, May through the first two weeks is very similar to the beginning of both February and March in terms of engagement. We saw great engagement. Again, so much variability in the weather, you know, this time of year that, you know, weeks 12 and 13 were a little softer, and we've seen great customer engagement back to what we saw in the first, you know, two periods of the quarter.

Michael, we reaffirmed our comp guidance with a range of flat 2%, and I'd say two comments about that. Number one, yes, the environment is different than it was three months ago, probably a more volatile external environment to a degree, but really kind of unclear on how that will all be. Shape out for the year. And so, as we saw last year, we've proven the ability to manage and take share through any environment. I mean, I'm looking at Billy thinking about how he hit his gross margin rate plan last year on the button, despite the fact that we had all tariff headwinds coming at us. So, yes, there's probably a little bit more uncertainty out there. Not sure how that will shake out. We feel great about how we're positioned. And then the second comment is it's still very early. We're one quarter in. We have our largest selling weeks still ahead of us in the second quarter. Now, we think we're positioned so well with the values the merchants have put in front of the... So, look, we're heading into the second .

Super helpful. My follow-up is, Ted, there's this debate in the marketplace, given the challenges with housing affordability, the rise in interest rates. Maybe we are just in a longer-lasting era where home improvement demand is going to be slower and softer for longer. Obviously, this has already persisted for a longer period than most had anticipated. So, if this continues, is there a point at which... You start to change either resource or capital allocation decisions. One of the debates out there is, will Home Depot get back to the point at which it can buy back stock in 2027 just to provide some support to shareholders in this period of prolonged softness? Thank you so much.

Well, we've always had cycles in this business, Michael, and we're very much looking at this as a cycle. You know, we all know there was a tremendous spike in demand for a few years, followed by what we've been calling a period of moderation. And the period of moderation, you know, has been extended. I think there have been some shocks in the past couple of years. But, you know... Quite remarkable, as I said, how the consumer has been pretty darn resilient to all of that. We're still focused on our long-term strategy. We laid out at the investor conference that we're going to focus on the core business, the interconnected offering to our customers, and winning with the pro. We still very much are bullish on the long-term, medium-long-term prospects in U.S. housing and homeownership, the value of the home and the aging of the home. You know all the drivers of the long-term benefits, and we're not contemplating changing how we're allocating capital, certainly to the core business and our allocation of resources to that three-prong. You know, as I said, we're focused on controlling what we can control. All indications are that customers, pro and consumer, are responding, and we're taking share. So we feel we're creating shareholder value by investing in the core business, in the interconnected business, and in the pro strategies. And we certainly pay a healthy dividend at the moment, so there's a nice return to shareholders in that regard.

Super helpful. Thank you so much, and good luck.

Our next question comes from the line of Simeon Gutman with Morgan Stanley. Please proceed with your question.

Hey, good morning. Ted, I wanted to ask you what success looks like in the wholesale distribution business, and if I can paraphrase what you said earlier, it's faster pro-growth. So does that mean that if roofing and drywall businesses grow independently, that's success, or do you need to cross-sell between them? And it sounds like this complex purchase occasion, do you care if you're cross-selling across all your platforms?

Yeah, hi, Samin. We certainly do care. So, you know, I previously talked more about our organic efforts, but if you look at the pro-distribution, Side, you know, there's always a customer within that $700 billion TAM that is a more specialized trade participant. And to capture that specialty trade pro, that's why we acquired SRS. They're a best-in-class distributor, leading positions in roofing, pool, and landscape. And then they made the acquisition of GMS, which had a leading position in interior building materials.

And then we're super excited about Mingeldorf's.

We've always liked the HVAC business, and they're a leader in the five southeastern states. I mentioned, again, why do we like things like roofing and pool and landscape and HVAC? It is more. Replace, remodel, as opposed to heightened exposure to new construction, and that's certainly the case with HVAC. And then don't forget, we're developing construction resources into a leading, finished interior platform. So we put together the organic efforts from what we're doing with Home Depot for the Crosstrade Pro, and then these... So first and foremost, we want these businesses, you know, the Home Depot Pro Business, all the SRS Pro Businesses, construction resources, to perform, you know, at an exceptional level in and of their own right within their sectors, within their verticals. And we believe they are. I mean, we look at the... I mean, they, they, they. But then, over time, we want to have a new business platform. But then, over time, we want to have a new And then, also... GMS. Then, Mike, maybe you can.

GMS. That's evident by, you know, between SRS, GMS, and HG Supply, and our teams on the Quote Center, you know, tool. We've talked about this a little bit at the investor conference. Earnings as well, and that's led to a national account structure between our companies, and a great example like that that you mentioned, Ted, is around just GMS and SRS themselves. You know, the state of the... Thank you. Thank you. Thank you. Thank you. That's paying dividends as well. This is another complex pro, where that gross demand continues to be a powerful engine for us. It's an impressive double-digit year-over-year increase, growing faster than the B2C experience. And then our managed sales force, right, both with our outside sales and our passes in the store. Thank you. Year-to-date, those managed accounts, both from the store and from outside sales, have generated, like I said, over. around getting on with our enterprise CRM efforts.

And if I may ask a follow-up for Richard, if you can comment on the comp spread between your best-performing markets and the weakest, whatever that spread is, has it changed much? And let's say, for example, your best is, you know, somewhere in the low single digits positive. Is the narrative weather, or is it housing, or anything else to it?

It is pretty narrow still, Simeon, and it's much – Definitely driven by weather or weather comparison.

Okay. Thank you. Good luck.

Our next question comes from the line of Zach Fadum with Wells Fargo. Please proceed with your question.

Hey, good morning. So following up on SRS, it looks like the business is still weighing on the comp in the ballpark of about 30 basis points. So as you think through the year for SRS categories, the market share opportunities, pricing levers, and then GMS entering the base later this year, could you talk to your expectation for second half? Comp impact from SRS as we move through the year.

Yeah, sure. So, look, as Ted said, SRS performed in line with our expectations. Just to talk about current performance, they delivered $4 billion in sales in the quarter. They delivered positive total sales growth and positive total organic sales growth. Comps were slightly negative for SRS in total, driven by low single-digit negative comps in roofing. As Ted said, despite significant pressures in the roofing market, by all external measures, SRS took considerable share from other distributors. Now, we do expect, as their compares, improve through the year. Remember that Q2 and Q3 of last year had some of the lowest recorded hail and hurricane storms in history, and so their back half was significantly pressured. For that reason, if we see a normal seasonal curve, From SRS, we expect them to deliver mid-single-digit positive organic growth for the year.

That's helpful, Richard. And then wanting to follow up on the gross margin line, the guidance would imply some improvement in the year-over-year change from here. So the first question is, For Q1, could you isolate the GMS impact versus core? And then as you think through the moving parts around the changing operating environment around us, freight, fuel, you had a 232 tariff change, how would these fold into the gross margin line as you move forward?

Well, so let's just take SRS and GMS for a second. So we expect gross margin for the year to be at 33.1, which is consistent with our original guide, with the change from last year largely reflecting the acquisition of GMS. And so if you look at our first quarter performance, 75 basis points below last year, the vast majority of that reflects the acquisition of GMS. There was some pressure, and we called this out on our Q4 call, and also called out that we expected some pressure from our footing in the roofing market and price investments at SRS. So recall, the roofing market saw a 28% drop in shipments in Q4 of last year. That's the worst quarter since 2019. And as we anticipated in our earnings guide last quarter, we've maintained our stance on value to keep momentum with our customers. And so that made up the remainder of the gap. Beyond that, the margin profile of the core was actually very stable. So as we move through the year, you're still going to see pressure on a year-over-year basis in Q2, not quite the degree that you saw in Q1, and then improving significantly. year-over-year when you get into Q3 and Q4. Now, as to your and other commodity input costs, new tariffs have been introduced, but The environment is changing almost every day. And so it's hard to see where all of that winds up and where it settles. We will continue, just like we did last year, to manage cost and price, to maintain our position as the customer's advocate for value as we move through the year. But yes, the cost on the horizon since we spoke last quarter.

Thanks for the thoughts, Richard. I appreciate it.

Thank you. By the way, if I could just clarify one statement. I think I got tongue-tied during my remarks. We opened two new stores during the quarter, not 12. I apologize for that.

Our next question comes from the line of Chuck Grom with Gordon Haskett. Please proceed with your question.

Hey, thanks. Good morning. Can you discuss the progress you guys are making with trade credit and the adoption of trade credit by pros, understanding it can take time to convert them? And then my follow-up with Ann on the merchandise execution teams, I think you said it's rolled out to 1,000 stores with plans for full adoption by the end of the year. Any change in basket or customer frequency as you roll out the MET teams?

So, I'll start on trade credit. Look, what we're building is a value prop that has never been built before for a broader customer set than has ever been reached by any kind of conventional distribution company, and so we're taking our time, making sure we understand. How to onboard as efficiently as possible, how to underwrite correctly, and how to really drive sales. And the important part of driving adoption is making sure that we set our outside sales reps up for success, because they're the ones really driving this adoption. So I think from my perspective, and I'll ask Mike to weigh in on what we actually see, look, we're rolling this out steadily. We're taking our time. As with most of the capabilities that we're enabling, we're more focused on taking continual steps forward, and that's what we're doing with trade credit. Mike, maybe talk about what the customer tells us.

Yeah, I mean, we're very pleased with the trajectory of pro trade credit so far. After gaining some pretty strong traction in 2025, we saw continued momentum, you know, this past quarter. What's most encouraging is that we're winning exactly where we would expect to, with single and multifamily builders and with large remodelers, and we're seeing strong adoption in longer lead time categories, like on windows, doors, and appliances. So a major driver for this is that pros absolutely love the fact that it's 30-day payment terms now on shipment rather than on point of sale, which gives them a... It's a distinct competitive advantage around working capital, and looking forward, you know, we've piloted recently the program online with a number of customers, and we're pleased with what we're seeing there and look forward to expanding that further within the second quarter, and, you know, as we expand our e-procurement capabilities also with construction management software and integration platforms, we'll be rolling ProTrade credit out to those channels also within the second quarter.

Yeah, and Chuck, just to follow up on the merchandise and execution team, let me start with, you know, we are maniacally focused on driving or core and culture, which is all stores and associates. And a key part of what the Home Depot has always done is driving service and driving sales. And so creating these distinct teams give us the ability for Apron Associates to really, really focus on driving, engaging. We'll talk about units for a batch. The customer to the fullest. And absolutely driving our... We are continually learning. Of course, we're seeing higher likelihood to shock against scores.

Great. Thank you, Ann.

Our next question comes to the line of Jihan Ma with Bernstein. Please proceed with your question. Hi, thank you for taking my question.

I want to talk about ticket versus traffic. Given that I think you are going to start to lap the tariff-driven price increases, how do you think the balance of the two are going to trend over the course of the year, and what does it take for traffic to turn positive again?

Yeah, you're right. We are lapsing some of the early tariff pieces. As Richard said, you know, they're still very volatile, to say the least, but there's no question that as those were introduced in late Q1 of last year and into Q2, we made some pivots in our strategy as we go forward. You know, we talked at our investor conference around some of the pricing into the marketplace. And that's settled into the market, and so we see that as kind of 3%, as we've talked about, you know, in the past. And then we've had great engagement so far in spring-related projects. We've got our biggest weeks ahead, so we'll see how, you know, that plays out for the balance of the year. But certainly, you know, from a year-over-year standpoint, there's obviously less pressure than we saw certainly a year ago.

Got it. And then a follow-up on the Mingeldorf side of things, you talked about that gives you a great point to start playing the parts market as well. But on the original HVAC side of things, it is a very distribution rights-centric market. Does that mean that there's more acquisitions that you'll need to make to continue to grow there? Thank you.

So Mingeldorf is a leading distributor in the southeast, as I mentioned. They're a carrier-focused distributor. What we like about the parts business is while you have regional exclusives on distribution in certain geographies of a brand of the HVAC equipment, Nationwide, so. Online. As it relates to. We would expect... You know, modest.

Great. Thank you.

Christine, we have time for one more question.

Thank you. Our next question comes from the line of Brian Nagel with Oppenheimer. Please proceed with your question.

Hi. Good morning. Thank you for taking my questions. So I guess I want to – I apologize. I want to, I guess, be an economist for a bit for a second, too. You know, with regard to, obviously, there's a lot of moving pieces out there, you know, a lot of factors that are impacting Home Depot's business at this point. But if you look at gas prices, I guess the question I want to ask is, historically, how have higher gas prices impacted your consumer? Then also, it may be looking at a different way, you know, as you think about just from an input cost into Home Depot, you know, and the various ways that gas prices affect your business. I mean, how should we be thinking about that dynamic here?

Well, first of all, Brian, I'd say if you look across history and you look at significant fuel price increases and their impact on demand, it's hard to parse out fuel increases from a general degree of pressure on consumer spending. And it also has to be taken in the context of the interest rate environment, which we're... More highly sensitive to. Look, there are a number of potential factors at play here. Yes, we see increased fuel costs not only hitting us directly. Obviously, we're obviously have a considerable amount of transportation expense in our P&L, but also in the form of At the same time, number one, it's still very early in the year, and number two, there are some potential tailwinds here. We've talked in our sector about tariff-free funds. We have filed for those tariff-free funds, and while we don't disclose the amount, and while We have received an immaterial amount to date. We have assumed that that could provide a significant offset to those costs. So it's very hard to understand exactly how all of this will balance out through the year, and we'll continue to watch it and manage it and manage through it.

That's very helpful. I appreciate that. My second question, again, I apologize for being nitpicky here, but just the commentary around May, the early part of fiscal Q2 here, I think you used the word consumer engagements back to what you saw maybe in February and March. I mean, should we basically think about the business right now is running domestically at those comp store sales levels you saw in February and March?

Yeah, it's been pretty steady. I mean, we've landed right at our expectations. I think, you know, Billy, maybe just repeat again what we saw April through the first few weeks of May.

Yeah, again, Brian, we had a very consistent performance February, March, and even into the first part of April, and then the weather just year over year the last couple of weeks of April. You know, it was a little bit different. And then, as we saw, as we've seen in May, very similar, great engagement in all of our spring-related projects, just as we saw through February, March, and really the first half of April. It was literally just the last two weeks where we saw significant weather differential, and again, back to the same engagement that we saw through the first 10 weeks or 11 weeks of the year.

I think that feeds finally back into the guidance question. Best thing we have is our observation, and we've observed the demand that we expected.

That's very helpful. I appreciate it. Thank you.

Ms. Jancy, I'd like to turn the floor back over to you for closing comments.

Thanks, Christine, and thanks, everybody, for joining us today. We look forward to speaking with you on our second quarter earnings call in August.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.