Home Depot Flags $730 Million Tariff Refund Boost to Gross Margin

EarningsMacro
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Summary · why it matters

Home Depot reported that its second-quarter fiscal 2026 gross margin rose about 25 basis points to 33.7%, helped by $730 million of IEEPA tariff refunds, of which $685 million reduced cost of goods sold and provided roughly 145 basis points of gross-margin benefit. That benefit offset about 60 basis points of higher costs tied to fuel, energy and other product inputs, though management expects those rising costs to fully offset the tariff-refund benefit over the full year and is also facing incremental tariff pressures not contemplated in its original 2026 plan. Home Depot expects a fiscal 2026 gross margin of 33.1% and a fourth-quarter gross margin roughly flat year over year. Among peers, Lowe's second-quarter fiscal 2026 gross margin fell 80 basis points as a roughly 30-basis-point tariff refund benefit was largely offset by elevated fuel and transportation costs, while Floor & Decor's adjusted gross margin slipped 20 basis points to 43.7% and the company guided to 43.6-43.8% for the year. Home Depot shares have lost 26.3% over the past year versus a 32% decline for the industry, and the stock trades at a forward price-to-earnings ratio of 19.87X against an industry average of 17.96X.

Impact on stocks 3

Consumer Discretionary± Mixed · 3 stocks
The Home Depot Inc
HD
▲ PositiveTariffrelevance

Home Depot's Q2 gross margin rose ~25 bps to 33.7% on $730M of IEEPA tariff refunds, adding ~145 bps of gross-margin benefit.

Lowe's Companies Inc
LOW
▼ NegativeSupplyrelevance

Lowe's Q2 gross margin fell 80 bps as elevated fuel and transportation costs largely offset its ~30-bp tariff refund benefit.

Floor & Decor Holdings Inc
FND
▼ NegativeSupplyrelevance

Floor & Decor's adjusted gross margin slipped 20 bps as elevated fuel and transportation costs offset tariff refunds.

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