Why did Home Depot miss expectations in the third quarter?

Management attributed the miss primarily to the lack of storms, which put greater-than-expected pressure on certain categories. An anticipated increase in demand also did not materialize, and management cited consumer uncertainty and continued housing pressure as disproportionately affecting home improvement spending.

How much of the sales growth came from the GMS acquisition?

GMS contributed approximately $900 million of the $1.1 billion sales increase in Q3, representing about eight weeks of sales. Excluding that contribution, underlying sales growth was minimal, consistent with comparable sales of +0.2%.

What does the updated guidance imply for the fourth quarter?

Based on nine-month results and the full-year guidance, implied Q4 GAAP EPS is roughly $2.37 versus about $3.01 last year, and implied adjusted EPS is roughly $2.49 versus about $3.12. Part of this decline reflects the prior year's 53-week fiscal period, but the implied drop still signals weak underlying demand and ongoing storm-related headwinds.

Is the dividend at risk given the cash flow trends?

The filing does not state dividend policy changes. However, nine-month cash dividends of $6.9B consumed about two-thirds of free cash flow of roughly $10.4B, while operating cash flow fell 14% and total debt increased. Coverage is tighter than in the prior period, so investors should monitor free cash flow and leverage, though the filing itself does not signal a dividend change.

Why did operating margin decline even though sales grew?

SG&A expenses rose 5.9% in Q3, faster than the 2.8% sales increase, and depreciation and amortization grew 3.9%. Gross margin held roughly flat at about 33.4%, so the deleverage came from operating expenses, including costs associated with the acquired GMS business, pushing operating margin down to 12.9% from 13.5%.

HD 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed November 18, 2025. Cited figures are marked; the original filing is the authoritative source.

The Home Depot reported third-quarter fiscal 2025 results that missed its own expectations.

Net sales rose 2.8% to $41.4 billion^a, but that growth was mostly driven by roughly $900 million from the GMS acquisition, which contributed about eight weeks of sales. Comparable sales grew only 0.2% (U.S. comparable sales rose 0.1%), and comparable customer transactions fell 1.6%, with growth coming from a 1.8% increase in the comparable average ticket. Diluted GAAP EPS fell 1.4% to $3.62, and adjusted diluted EPS fell 1.1% to $3.74.

Management blamed a lack of storm activity, consumer uncertainty, and continued housing pressure. Operating margin contracted to 12.9%^b from 13.5%, as SG&A grew 5.9% against 2.8% sales growth. The company cut its fiscal 2025 outlook.

Management now expects total sales growth of about 3.0%, including roughly $2.0 billion^c of GMS contribution, with comparable sales only slightly positive on a 52-week basis. GAAP diluted EPS is now guided to decline about 6.0% from $14.91, and adjusted diluted EPS to decline about 5.0% from $15.24. Implied fourth-quarter EPS is a meaningful step down.

Using nine-month results, the guidance implies roughly $2.37^d of GAAP EPS in Q4 versus about $3.01 a year ago, and roughly $2.49 of adjusted EPS versus about $3.12. The prior-year fourth quarter had 14 weeks in a 53-week fiscal year, which partly explains the comparison. Balance sheet and cash flow data show increased financial leverage.

Total debt (short-term, current, and long-term) rose to about $56.0 billion from about $53.4 billion at fiscal year-end 2024. Nine-month operating cash flow fell 14% to $13.0 billion, weighed by a $2.7 billion working capital outflow, and cash dividends of $6.9 billion consumed about two-thirds of free cash flow of roughly $10.4 billion.

Acquisition spending was $5.2 billion, down sharply from $17.6 billion a year earlier, and no share repurchases were made in the period. Investors will be watching whether the Q4 demand recovery and the GMS integration can offset the weak core comparable trend.

02—Key points

Key Highlights

Q3 net sales rose 2.8% to $41.4B, but comparable sales were only +0.2% (U.S. +0.1%) and comparable transactions fell 1.6%, with growth driven by a 1.8% higher average ticket.
Q3 GAAP diluted EPS was $3.62 (down 1.4% YoY) and adjusted diluted EPS was $3.74 (down 1.1%), both below management's expectations.
Operating margin fell to 12.9% from 13.5% as SG&A grew 5.9%, outpacing sales growth; gross margin was roughly flat at about 33.4%.
FY2025 guidance was lowered: total sales growth about 3.0% (including about $2.0B from GMS), GAAP EPS down about 6% and adjusted EPS down about 5% versus fiscal 2024.
Guidance implies a sharp fourth-quarter slowdown, with adjusted EPS of roughly $2.49 versus about $3.12 a year ago (partly due to the prior-year 53rd week).
Total debt rose to about $56.0B from about $53.4B at fiscal year-end 2024, and nine-month operating cash flow fell 14% to $13.0B.
Nine-month dividends of $6.9B absorbed about two-thirds of free cash flow, and no share repurchases were made in the period.

03—Questions

Frequently Asked Questions

Why did Home Depot miss expectations in the third quarter?
Management attributed the miss primarily to the lack of storms, which put greater-than-expected pressure on certain categories. An anticipated increase in demand also did not materialize, and management cited consumer uncertainty and continued housing pressure as disproportionately affecting home improvement spending.
How much of the sales growth came from the GMS acquisition?
GMS contributed approximately $900 million of the $1.1 billion sales increase in Q3, representing about eight weeks of sales. Excluding that contribution, underlying sales growth was minimal, consistent with comparable sales of +0.2%.
What does the updated guidance imply for the fourth quarter?
Based on nine-month results and the full-year guidance, implied Q4 GAAP EPS is roughly $2.37 versus about $3.01 last year, and implied adjusted EPS is roughly $2.49 versus about $3.12. Part of this decline reflects the prior year's 53-week fiscal period, but the implied drop still signals weak underlying demand and ongoing storm-related headwinds.
Is the dividend at risk given the cash flow trends?
The filing does not state dividend policy changes. However, nine-month cash dividends of $6.9B consumed about two-thirds of free cash flow of roughly $10.4B, while operating cash flow fell 14% and total debt increased. Coverage is tighter than in the prior period, so investors should monitor free cash flow and leverage, though the filing itself does not signal a dividend change.
Why did operating margin decline even though sales grew?
SG&A expenses rose 5.9% in Q3, faster than the 2.8% sales increase, and depreciation and amortization grew 3.9%. Gross margin held roughly flat at about 33.4%, so the deleverage came from operating expenses, including costs associated with the acquired GMS business, pushing operating margin down to 12.9% from 13.5%.

04—Continue

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