Home Depot sees $730M in tariff refunds, earnings boosted by small projects

Home Depot said its net income increased to nearly $4.8 billion in the second quarter, up 4.7% from last year. That’s a reversal from last quarter, when its profit dipped.

Home Depot is an economic bellwether and its financial results are closely watched as a gauge of consumer spending and the housing market, both of which remain under pressure.

Higher interest rates and inflation are discouraging homeowners from taking on larger renovation projects or trading up for newer homes, which opens inventory for would-be buyers.

“We’ve seen housing turnover at these low levels for four years now,” Richard McPhail, Home Depot’s chief financial officer, said on a Tuesday conference call. “There’s just no sign of an inflection point at this moment.”

But Home Depot has spent billions to gain more wallet share from professional contractors, and now that side of the business is outperforming do-it-yourself consumer spending, executives said Tuesday. During the quarter, the company reported strength in pro categories such as decking, pipe and fittings, fasteners, hand tools and concrete.

Spring-related categories — such as live goods, mulch, patio and grills — were strong for DIY customers, Home Depot added.

How tariff refunds helped offset costs

Home Depot’s second-quarter results beat Wall Street expectations, and the company maintained its full-year guidance, including forecast sales growth of 2.5% to 4.5%.

The company said it is including tariff refunds in its guidance, which it expects to “partially offset unplanned fuel, energy and other product input costs throughout the fiscal year.”

Earlier this year, the U.S. Supreme Court ruled it was illegal for President Donald Trump to impose certain tariffs under the International Emergency Economic Powers Act without congressional approval.

The U.S. Customs and Border Protection launched a portal for companies to apply for tariff refunds. So far, the federal government has refunded more than $100 billion to corporate importers.

Home Depot said it received $730 million in tariff refunds in the second quarter, which McPhail said was the “vast majority” of what the company expects to receive back. Of that, about $685 million was used to reduce the cost of goods sold in the quarter, he said.

“While we received those refunds in the second quarter, we’ve also experienced unplanned pressure from fuel, energy and other product input costs that we expect will fully offset the benefit from tariff refunds over the year,” McPhail said on the conference call.

Energy costs, which surged since the U.S. and Israel launched the war with Iran, have weighed on the economy so far this year.

What is the latest on Ted Decker?

McPhail is one of the two executives filling in for Ted Decker, Home Depot’s chairman, president and CEO, who is on a temporary medical leave of absence, the company said last week.

Ann-Marie Campbell, senior executive vice president of U.S. stores and operations, is overseeing Home Depot’s day-to-day operations, while McPhail is leading the company’s financial management and its professional contractor subsidiaries.

“We look forward to Ted’s return in a few months, and we will share any material developments as appropriate,” McPhail said on the conference call.

He didn’t elaborate on Decker’s medical condition.

Home Depot rolls out express delivery

Home Depot, in a separate announcement Tuesday, said it is rolling out express delivery nationwide, promising that customers can receive orders in three hours or less. This includes materials and supplies for professional contractors.

Home Depot said the service costs a “small flat fee,” and the company is leveraging its supply chain network and more than 2,000 U.S. stores as fulfillment hubs.

“The majority of those deliveries are actually happening in less than one hour, and so we’ll continue to work that promise time down to customers in the months ahead,” Jordan Broggi, Home Depot’s executive vice president of customer experience and president of online, said on the conference call.