Management’s Discussion and Analysis of Financial Condition and Results of Operations
MRO
Maintenance, repair, and operations
NOPAT
Net operating profit after tax
NYSE
New York Stock Exchange
PLCC
Private label credit card
Pro
Professional customer
Restoration Plans
Home Depot FutureBuilder Restoration Plan and HD Supply Restoration Plan
ROIC
Return on invested capital
SEC
Securities and Exchange Commission
Securities Act
Securities Act of 1933, as amended
Selling, general, and administrative expenses
SRS
SRS Distribution Inc.
Fiscal 2025 Form 10-K
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FORWARD-LOOKING STATEMENTS
Certain statements contained herein, as well as in other filings we make with the SEC and other written and oral information we release, including statements regarding our performance, estimates, expectations, beliefs, intentions, projections, strategies for the future, or other events or developments in the future may constitute “forward-looking statements” under the federal securities laws, including as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events, and use words such as “may,” “will,” “could,” “should,” “would,” “anticipate,” “intend,” “estimate,” “project,” “plan,” “believe,” “expect,” “target,” “prospects,” “potential,” “commit” and “forecast,” or words of similar import or meaning or refer to future time periods.
Forward-looking statements may relate to, among other things, our brand and reputation; the demand for our products and services, including as a result of macroeconomic conditions and changing customer preferences and expectations; net sales growth; comparable sales; the effects of competition; implementation of interconnected, store, supply chain, technology, innovation and other strategic initiatives, including with respect to real estate; inventory, on-shelf availability, and in-stock positions; the state of the economy; the state of the housing and home improvement markets; the state of the credit markets, including mortgages, home equity loans, and consumer and trade credit; the impact of tariffs; trade policy changes or restrictions, or international trade disputes and efforts and ability to continue to diversify our supply chain; issues related to the payment methods we accept; demand for credit offerings, including trade credit; management of relationships with our associates, jobseekers, suppliers and service providers; cost and availability of labor; costs of fuel and other energy sources; events that could disrupt our business, supply chain, technology infrastructure, or demand for our products and services, such as tariffs, trade policy changes or restrictions or international trade disputes, natural disasters, climate change, public health issues, cybersecurity events, and labor ; geopolitical tensions or , military , or acts of war; our ability to maintain a safe and secure store environment; our ability to address expectations regarding sustainability and human capital management matters and meet related goals; continuation or of share repurchases; net earnings and margin performance; earnings per share; future dividends; capital allocation and expenditures; productivity; liquidity; ROIC; expense and debt leverage; changes in interest rates; changes in foreign currency exchange rates; commodity or other price inflation and deflation; our ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of , inquiries, , and , including compliance with related settlements; the of operating in international markets; the adequacy of insurance coverage; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of legal and regulatory changes, including executive orders and other administrative or legislative actions, such as changes to tax laws and regulations; store openings and ; financial outlook; and the impact of acquired companies, including SRS and GMS, on our organization and the ability to recognize the anticipated benefits of completed or pending acquisitions.
These statements are not guarantees of future performance and are subject to future events, risks and uncertainties — many of which are beyond our control, dependent on the actions of third parties, or currently unknown to us — as well as potentially inaccurate assumptions that could cause actual results to differ materially from our historical experience and our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Part I, Item 1A. Risk Factors , and elsewhere in this report and also as described from time to time in reports subsequently filed with the SEC. You should read such information in conjunction with our consolidated financial statements and related notes and Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report. There also may be other factors that we cannot anticipate or that are not described herein, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations. Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our filings with the SEC and in our other public statements.
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PART I
Item 1. Business.
INTRODUCTION
The Home Depot, Inc. is the world’s largest home improvement retailer based on net sales for fiscal 2025. We offer our customers a wide assortment of home improvement products, building materials, lawn and garden products, décor products, and facilities MRO products, in stores and online. We also provide a number of services, including home improvement installation services, and tool and equipment rental. As of the end of fiscal 2025, we o perated 2,359 stor es located throughout the U.S. (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam), Canada, and Mexico. The Home Depot stores average approximately 104,000 square feet of enclosed space, with approximately 24,000 additional square feet of outside garden area. We also maintain a network of distribution and fulfillment centers, as well as mobile applications and e-commerce websites in the U.S., Canada, and Mexico. For disclosure purposes, the geographic operating segments of the U.S., Canada and Mexico are aggregated into one reportable segment (the “Primary segment”).
In fiscal 2024, we acquired SRS, a leading residential specialty trade distribution company across several verticals engaged in the distribution of residential and commercial roofing products and complementary building products, landscape supplies, and swimming pool supplies serving the professional roofer, landscaper, and pool contractor. In fiscal 2025, SRS completed the acquisition of GMS, a leading distributor of specialty building products, including drywall, ceilings, steel framing and other complementary construction products. At the end of fiscal 2025, SRS, which includes GMS, operated over 1,250 locations throughout the U.S. and Canada, most of which have a distribution center, material handling and delivery equipment, and inventory. Following the GMS acquisition, SRS is organized as four different lines of business: roofing and building products, interior and construction products, landscape, and pool. Each line of business was determined to represent an operating segment, none of which are deemed reportable segments.
Unless otherwise indicated or the context otherwise requires, when we refer to “The Home Depot,” “Home Depot,” the “Company,” “we,” “us” or “our” in this report, we are referring to The Home Depot, Inc. and its consolidated subsidiaries.
The Home Depot, Inc. is a Delaware corporation that was incorporated in 1978. Our Store Support Center (corporate headquarters) is located at 2455 Paces Ferry Road, Atlanta, Georgia 30339. Our telephone number at that address is (770) 433-8211.
OUR BUSINESS
OUR STRATEGY
The Home Depot is focused on leveraging its distinct competitive advantages – our brand, excellent customer service, product authority in home improvement, knowledgeable associates and culture, scale, premier real estate portfolio, digital and interconnected experience, supply chain network, and our deep relationships with Pros – to take advantage of the significant growth opportunities in the highly fragmented markets in which we operate. In fiscal 2025, we strategically invested across our business to advance our growth strategy:
• Drive our core and culture by supporting our associates so that they can deliver the best customer experience in home improvement;
• Deliver a frictionless interconnected customer experience, regardless of whether our customers choose to engage and shop with us in-store or through our digital properties; and
• Win with Pros through our differentiated value proposition and ecosystem of capabilities.
We believe that this strategy will help us grow faster than the market and deliver value to our shareholders. Driven by our core values, our Inverted Pyramid model reminds us who matters most – our customers and our associates. These values, embedded in our culture since the Company’s founding, continue to guide us as our business evolves.
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DELIVER SHAREHOLDER VALUE
We seek to deliver on our objective to create shareholder value through our disciplined approach to capital allocation. Our capital allocation principles are as follows:
• First, we intend to reinvest in our business to drive growth faster than the market.
• Second, after reinvesting in the business, we look to pay a quarterly dividend.
• Third, after reinvesting in our business and paying our dividend, we intend to return excess cash to our shareholders through share repurchases.
In fiscal 2025, we invested $3.7 billion in capital expenditures across initiatives supporting our strategy of driving our core and culture, including building new stores and maintaining existing stores, delivering a frictionless, interconnected experience, and winning with Pros. SRS also acquired GMS to accelerate the vision of becoming a leading, multi-category building materials distributor. We continue to focus on driving productivity throughout the business, including by leveraging technology to drive efficiency in freight flow management, supply chain optimization, and streamlining central processes. By reinvesting in our business to drive growth and productivity, we are able to improve the customer experience, increase our competitiveness in the market, and deliver shareholder value.
In fiscal 2025, we returned $9.2 billion to shareholders in the form of cash dividends, following a 2.2% increase in our quarterly cash dividend from $2.25 per share to $2.30 per share announced in February 2025. Our capital allocation is discussed further in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OUR CUSTOMERS
We serve two primary customer groups — consumers (including both DIY and DIFM customers) and Pros — and have developed varying approaches to meet their diverse needs:
DIY Customers
These customers are typically homeowners who purchase products and complete their own projects and installations. Our associates assist these customers both in our stores and through digital resources designed to provide product and project knowledge. We also offer a variety of clinics and workshops to share this knowledge and to build an emotional connection with our DIY customers. As the preferences and behaviors of our DIY customers change, we are continuing to invest in capabilities to better meet their evolving expectations.
Pros
These customers are primarily professional renovators/remodelers, general contractors, homebuilders, maintenance professionals, handymen, property managers, building service contractors and specialty tradespeople, such as electricians, landscapers, insulation installers, plumbers, painters, pool contractors, roofers, and wallboard and ceiling installers. These customers build, renovate, remodel, repair, and maintain residential properties, multifamily properties, hospitality properties, and commercial facilities, including educational, healthcare, governmental, institutional, and office buildings, as well as data centers.
We have a number of initiatives designed to drive growth with Pros, including those working on both simple and complex projects. We remain focused on providing a customized digital experience tailored to Pros’ needs, a dedicated sales force, a broad and deep assortment of Pro-focused products and brands, an extensive delivery network, our Pro Xtra loyalty program, and enhanced credit offerings. Building on our historical strength as a destination for all Pros, we are continuing to invest in differentiated capabilities that will help us better serve our Pros’ needs, including differentiated fulfillment options, preferred pricing, additional trade credit offerings including our Pro Trade Credit program, more convenient locations and showroom space, and technology tools designed to streamline order management and project planning and management. In fiscal 2024, we acquired SRS, which sells products to specialty trade roofers, landscapers, and pool contractors. The acquisition of GMS by SRS in fiscal 2025 further expanded our ability to serve Pros by adding specialty interior building products such as wallboard, ceilings, steel framing and complementary products for residential and commercial projects. We also provide MRO products and related value-added services to multifamily, hospitality, healthcare, and government housing facilities, among others, primarily through our subsidiary HD Supply.
We believe these investments in differentiated capabilities support our goal to serve as the preferred partner for our Pros across their entire project, giving them the choice to streamline their purchasing to optimize efficiency and complete their jobs on time and on budget.
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DIFM Customers
Intersecting our DIY customers and our Pros are our DIFM customers. These customers are typically homeowners who use Pros to complete their projects or installations. Currently, we offer installation services in a variety of categories, such as flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, windows, and window coverings. DIFM customers can purchase these services in our stores, online, or in their homes through in-home consultations. In addition to serving our DIFM customer needs, we believe our focus on Pros who perform services for these customers helps us drive higher product sales.
OUR PRODUCTS AND SERVICES
A typical Home Depot store stocks approximately 30,000 to 40,000 items during the year, including both national brand name and proprietary products, across the following merchandising departments: Appliances, Bath, Building Materials, Electrical, Flooring, Hardware, Indoor Garden, Kitchen & Blinds, Lighting, Lumber, Millwork, Outdoor Garden, Paint, Plumbing, Power, and Storage & Organization. Our online product offerings complement our stores by serving as an extended aisle, and we offer a significantly broader product assortment through our mobile applications and websites, including homedepot.com, our primary website; homedepot.ca and homedepot.com.mx, our websites in Canada and Mexico, respectively; hdsupply.com, our website for our MRO products and related services; our websites for custom window coverings, including blinds.com, justblinds.com and americanblinds.com; constructionresourcesusa.com, our website for design-oriented surfaces, appliances and architectural specialty products for Pros; thecompanystore.com, our website featuring textiles and décor products; and srsdistribution.com, heritagelandscapesupplygroup.com, heritagepoolsupplygroup.com, and gms.com, our websites serving the roofing and exterior building materials, landscape, pool product, and interior building product needs of specialty trade Pros, respectively.
Our merchandising organization delivers product innovation, assortment and value, which reinforces our position as the product authority in home improvement and is one of our distinctive competitive advantages. At the same time, we remain focused on offering the right products at everyday value in our stores and online. The strong strategic relationships that our merchandising organization builds with our vendors position us to deliver on our goals for our customers and offer a compelling business proposition for these market-leading suppliers. As part of our focus on product differentiation, we have formed strategic alliances and exclusive relationships with certain suppliers to market products under a variety of well-recognized brand names. We have also developed relationships with certain suppliers to allow us to offer proprietary products that are comparable to national brands. These proprietary products help differentiate us from other retailers and generally carry higher margins than national brand products.
To keep pace with changing customer expectations and increasing desire for innovation, localization, and personalization, we continue to invest in tools to better leverage our data and drive a deeper level of collaboration with our suppliers. As a result, we continue to focus on enhanced merchandising information technology tools to help us: (1) enhance an interconnected shopping experience tailored to our customers’ shopping intent and location; (2) provide the best value in the market; and (3) optimize our product assortments. Our merchandising team leverages technology and works closely with our inventory and supply chain teams, as well as our suppliers, to manage our assortments, drive innovation, manage the cost environment, and adjust inventory levels to respond to shifts in demand.
To complement our merchandising efforts, we offer a number of services for our customers, including installation services for our DIY and DIFM customers, as noted above. We also provide tool and equipment rentals at many locations, providing value and convenience for both Pros and consumers. To improve the customer experience and continue to grow this differentiated service offering, we continue to invest in more tool rental locations, more tools, and better technology.
Sourcing and Quality Assurance
We maintain a global sourcing program to obtain high-quality and innovative products directly from manufacturers in the U.S. and around the world. For many years, we have worked to diversify our global supply chain. During fiscal 2025, in addition to our U.S. sourcing operations, we maintained sourcing offices in Mexico, Canada, India, Vietnam, Taiwan and China, as well as certain locations in Europe. Under our standard supplier buying agreement, our suppliers are obligated to ensure that their products comply with applicable international, federal, state and local laws. This standard agreement also requires compliance with our responsible sourcing standards, which cover a variety of expectations, including supply chain transparency, compliance with applicable laws and regulations addressing prohibitions on child and forced labor, health and safety, environmental matters, compensation, and hours of work. To drive accountability with our suppliers, our standard supplier buying agreement also includes a factory audit right related to these standards, and we conduct risk-based factory audits and compliance visits with
Fiscal 2025 Form 10-K
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non-Canada and non-U.S. suppliers of private branded and direct import products. Our 2025 Responsible Sourcing Report, available on our Investor Relations website at https://ir.homedepot.com under “Sustainability,” provides more information about this program. In addition, we have both quality assurance and engineering resources dedicated to establishing criteria and overseeing compliance with safety, quality, and performance standards for our private branded products.
Intellectual Property
Our business has one of the most recognized brands in North America. As a result, we believe that The Home Depot ® trademark has significant value and is an important factor in the marketing of our products, e-commerce, stores and business. We have registered or applied for registration of trademarks, service marks, copyrights and internet domain names, both domestically and internationally, for use in our business, including our proprietary brands such as HDX ® , Husky ® , Hampton Bay ® , Home Decorators Collection ® , Glacier Bay ® , Vigoro ® , Everbilt ® and Lifeproof ® . The duration of trademark registrations varies from country to country. However, trademarks are generally valid and may be renewed indefinitely as long as they are in use and/or their registrations are properly maintained.
We also maintain patent portfolios relating to our business operations, retail services, and products, and we seek to patent or otherwise protect innovations we incorporate into our business. Patents generally have a term of twenty years from the date they are filed. As our patent portfolio has been built over time, the remaining terms of individual patents across our patent portfolio vary. Although our patents have value, no single patent is essential to our business. We regularly assess our merchandising departments and product lines for opportunities to expand the assortment of products offered within The Home Depot’s portfolio of proprietary and exclusive brands.
COMPETITION AND SEASONALITY
Our industry is highly competitive, highly fragmented, and evolving. As a result, we face competition for customers for our products and services from a variety of retailers (including those operating reseller marketplaces), suppliers, service providers, distributors and manufacturers that sell products directly to their respective customer bases. These competitors range from traditional brick-and-mortar, to multichannel, to exclusively online, and they include a number of other home improvement retailers; local, regional and national hardware stores; electrical, plumbing and building materials supply houses; and lumber yards. With respect to some products and services, we also compete with specialty design stores, showrooms, discount stores, paint stores, specialty and mass digital retailers, warehouse clubs, MRO distributors, national and local wholesale supply distributors, home décor retailers, and other retailers, as well as with providers of home improvement services and tool and equipment rental. Online and other digital capabilities, as well as AI tools, facilitate competitive entry, price transparency, and comparison shopping, increasing the level of competition we face.
Both in-store and online, we compete primarily based on customer experience; price; quality; product availability, assortment, and innovation; and delivery options and capabilities. We also compete based on store and branch location and appearance, presentation of merchandise, and ease of shopping experience throughout every step of the project, from inspiration and research to any post-purchase support. Our Pros also look for dedicated sales support, competitive credit and pricing options, project planning tools, professional and reliable deliveries, and product depth and job-lot quantities, particularly for their complex project needs. Furthermore, with respect to delivery options, customers are seeking faster and/or guaranteed delivery times, real-time updates on delivery status, low-price or free shipping, and/or convenient pickup options. Our ability to be competitive on delivery and pickup times, options and costs depends on many factors, as described more fully under “Our Supply Chain” below, and our interconnected strategy.
Our business is subject to seasonal influences. Generally, our highest volume of sales occurs in our second fiscal quarter, as we move into the spring season in the regions in which we operate.
INTERCONNECTED SHOPPING EXPERIENCE
We continue to enhance our capabilities to provide our customers with a frictionless interconnected shopping experience across our stores, branches, online, on the job site, and in their homes, focusing on continued investments in our mobile applications and websites to enhance the customer experience. When we discuss the “interconnected experience,” we are referring to our customers’ many touchpoints across our physical and digital assets throughout their entire shopping journey. Home Depot is primarily a project retailer, and it is our goal to help customers solve problems across their entire project. We aim to provide the best experience across our physical and digital assets, throughout the entire shopping journey from inspiration to post-purchase support, and we believe that engagement with customers across different touchpoints has driven increases in sales.
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Digital Experience
Enhancements to our digital platforms are critical for our increasingly interconnected customers, who often research products and check available inventory online before visiting one of our stores to view products in person or talk to an associate and then making their purchase either in store or online. While in the store, or following a visit to one of our stores, customers may also go online to access ratings and reviews, compare prices, view our extended assortment, and purchase additional products. Our investments in a truly interconnected experience are focused on bringing together the power of our physical presence and the frictionless interaction of our digital capabilities.
A significant majority of the traffic in Home Depot’s digital channels is on mobile devices. Mobile users expect more simplicity and relevancy in their digital interactions. In addition to supporting our DIY and DIFM customers throughout their shopping journeys, our mobile applications and other digital tools can also help serve the needs of Pros, including those working on complex projects. As a result, we have invested in our digital platforms to improve the overall presentation and ease of navigation for our customers. We have also enhanced the “shopability” of an online product by including more information on the product’s landing page, including related products and/or parts of a collection, as well as various fulfillment options. In addition, we are leveraging AI tools to improve our search, recommendations, and chat features, and offering new AI-powered customer-facing tools such as Magic Apron TM , which supports customers and associates with online product and project inquiries, and our AI-powered Blueprint Takeoffs Tool and Material List Builder, which generate project-specific materials lists and quotes. We believe our focus on improving search capabilities, digital functionality, category presentation, product content such as customer product review summaries, project inspiration and support, speed to checkout, and fulfillment options has yielded higher traffic, conversion and continued sales growth. As our customers expect a more personalized experience, our ability to collect, use, retain, and protect relevant customer data is important to effectively meet their expectations.
Further, we do not view the interconnected experience as a specific transaction; rather, we believe it encompasses an entire journey from inspiration and know-how, to purchase and fulfillment, to post-purchase support. Customers continue to expect more personalized messaging, and we remain focused on connecting marketing activities with the online and in-store experiences to create seamless engagement across channels. From the inspirational point of the purchase journey to providing product know-how, we continue to invest in the infrastructure and capabilities needed to deliver the most relevant marketing messages to our customers based on what is important to them today.
Store Experience
Our stores remain the hub of our business, and we continue to invest to improve the customer shopping experience through easier navigation and increased convenience and speed of checkout. In fiscal 2025, we continued to leverage the investments made in our store experience over the past several years to operate effectively and meet customer expectations, as well as investing in dedicated teams to better meet the needs of our Pros in-store. We have also empowered our customers with additional self-help tools, including mobile application-enabled store navigation and Magic Apron. Our Home Depot mobile application provides store-specific maps that allow customers to pinpoint the exact location of an item on their mobile devices. We also recognize that another critical part of delivering an excellent customer experience in the store is having products on our shelves, and we have enhanced our use of technology such as Computer Vision, which provides greater visibility into where product is located, including both on shelves and in the overhead space, us to drive higher on-shelf availability. We believe these investments are driving higher customer scores, and we will continue to invest to the customer experience. In addition, we have identified areas that have experienced significant population growth or where market voids exist. In fiscal 2023, we initiated a plan to open approximately 80 new stores over a five-year period to address those , and in fiscal 2025, w e opened 12 new s tores . We expect to complete this goal of approximately 80 new stores in fiscal 2027, after which point we plan to open approximately 15 to 20 new stores per year. These new stores will continue to help relieve pressure at existing high-volume stores and add capacity in areas with less store coverage, helping us to the customer experience and drive sales growth.
Investing in the Associate Experience. We continually strive to improve our store operations by removing complexity and inefficient processes, allowing our associates to spend more of their time serving our customers. To this end, we have continued to focus on process improvements like optimizing product flow to improve on-shelf availability and reduce the amount of time store associates spend locating products, as well as expanding in-aisle, real-time mobile learning tools for our associates’ development and assistance with customer questions. Our associates are also using web-enabled handheld devices to help them more efficiently meet the needs of the business and serve customers. These digital “hdPhone” devices offer enhanced functionality that allows associates to readily query inventory, access applications that support customer service, and assist with locating products. Our
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hdPhones also give our U.S. Home Depot store associates access to Sidekick, an application that directs associates to bays where product is low or out of stock and helps our associates prioritize the highest value tasks more effectively. In addition, we are using labor model tools to better align associate activity with customer needs. This includes transitioning more of our store tasking to our merchandising execution team (MET), leveraging MET associates’ expertise to reinforce in-aisle associates’ focus on excellent customer service.
Investing in Safety. We remain committed to maintaining a safe shopping and working environment for our customers and associates. We accomplish this by creating a strong culture of safety, building on our core value of Taking Care of Our People, that starts from the top with engaged leaders who empower associates to make decisions that prioritize the safety of everyone. We use data to identify areas of greatest risk, including emerging risks, and invest in tools, equipment and technology to reduce those risks in our packaging, processes, and behaviors. Our associate training and awareness initiatives target individual roles and responsibilities, integrating with overall strategies that promote physical and psychological safety and emotional wellness.
We empower trained EH&S associates to continuously evaluate, develop, implement and enforce policies, processes and programs in our stores, facilities and offices across the Company. Our EH&S policies are woven into our everyday operations for site, district and regional teams, and integrate with operating platforms to provide safety line-of-sight to associates and their leaders. Common program elements include daily store inspection checklists; routine follow-up audits from our store-based safety team members; preventative maintenance programs to promote equipment and physical space safety; and departmental merchandising safety standards.
OUR SUPPLY CHAIN
We continue to focus on building best-in-class competitive advantages in our supply chain to be responsive to our customers’ expectations for how, when and where they choose to receive our products and services. As part of enhancing the interconnected experience, over the past several years, we have invested in our supply chain network with the goal of achieving the fastest, most efficient and most reliable delivery capabilities in home improvement. With that investment now largely complete, our supply chain initiatives have positioned us to operate effectively and meet our customers’ needs for product availability and fast, reliable delivery.
We centrally forecast and replenish the vast majority of our Home Depot store products through sophisticated inventory management systems and utilize our network of distribution centers to serve both our stores’ and customers’ needs. Our supply chain includes multiple distribution center platforms in the U.S., Canada, and Mexico that are tailored to meet the needs of our stores and customers based on types of products, location, transportation, and delivery requirements. These include rapid deployment centers, stocking distribution centers, bulk distribution centers, FDCs, and direct fulfillment centers, among others. Over the past several years, we have invested to further automate and mechanize our rapid deployment center network to drive greater efficiency and faster movement of product.
We have also enhanced our supply chain network with our expanded fulfillment facilities designed to drive speed and reliability of delivery for our customers. Our 'ship from best location' initiative seeks to optimize delivery speed, reliability, cost, and capacity by leveraging machine learning algorithms to route orders to the optimal fulfillment node. In many markets, we offer same day or next day delivery of a multitude of products through our stores and fulfillment centers. We have market delivery operations that function as local hubs to consolidate freight for dispatch to customers for the final mile of delivery, with a focus on appliances. Because we typically do not stock appliances in our facilities, we have invested in our capabilities to control more of our appliance delivery end-to-end, manage our appliance delivery volume through our market delivery operations, and expand our last mile delivery capacity. We have also opened FDCs that handle large items like lumber and building materials transported on flatbed trucks. We are deploying a new delivery method called FDC Relay, which leverages our existing FDCs to enhance our performance in our current FDC markets and broadens our reach across a greater number of markets. Our network is designed to create a competitive advantage with unique, industry- capabilities for home needs for both our Pros and consumers. We will continue to invest in our supply chain network as needed to support our business.
In addition to our distribution and fulfillment centers, we leverage our stores as a network of convenient customer pickup, return, and delivery fulfillment locations. We believe our premium real estate footprint provides a distinct competitive advantage. For customers who shop online and want to pick up or return merchandise at a store, or have product delivered from a store, we offer a variety of options: BOSS, BOPIS, BODFS, and BORIS. We also provide curbside pickup to complement our BOPIS offerings, in addition to the self-service lockers at the front entrance of many of our stores. We also offer car and van delivery service from the majority of our U.S. stores. For fiscal 2025, approximately 50% of our U.S. online orders were fulfilled through a store. SRS branch locations throughout the U.S. and Canada also enable deliveries direct to customer job sites on their preferred timelines. We
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continue to focus on developing new capabilities to improve both efficiency and customer experience for delivery from our stores and branches. Our strategic intent is to have a portfolio of efficient, timely and reliable sources and methods of delivery to choose from, optimizing order fulfillment and delivery based on customer needs, inventory locations, and available transportation options.
SUSTAINABILITY AND HUMAN CAPITAL MANAGEMENT
We view sustainability and human capital management matters through the lens of our business, with an understanding that if we support our associates, our customers, our suppliers, and the communities we serve, we also support our business and create value for our shareholders. Our sustainability and human capital management priorities build on the culture and values on which Home Depot was founded, and our initiatives are embedded in our business strategy and activities. We organize our efforts around three pillars: (1) Focus on Our People, (2) Operate Sustainably, and (3) Strengthen Our Communities. Highlights of each of these pillars are set forth below. For further information on our three pillars, including related goals, see our Fiscal 2024 Living Our Values Report, available on our investor relations website at https://ir.homedepot.com/sustainability.
Focus on Our People
Our culture and our associates provide intangible and hard-to-replicate competitive advantages, which have been key to helping us navigate challenging market conditions. Our associates are essential to providing the experience and service that our customers expect. To preserve and protect that customer experience, we focus on cultivating a compelling associate experience, which we believe supports our ability to attract and retain our associates. This includes investing in competitive wages and benefits while also providing the culture, tools, training, and development opportunities that make working at The Home Depot an enjoyable and rewarding experience. These actions are the foundation of our core values of Taking Care of our People, Entrepreneurial Spirit, Building Strong Relationships, and Respect for all People.
Culture and Values. The Home Depot has a strong commitment to ethics and integrity, and we are a values- and culture-centric business. Our commitment to our core values drives our approach to human capital management. Our culture is based on our servant leadership philosophy represented by the inverted pyramid, which puts primary importance on our customers and our associates by positioning them at the top, with senior management at the base in a support role. We bring our culture to life through our core values, which serve as the foundation of our business and as the guiding principles behind the decisions we make every day.
Our values also guide our efforts to create an environment that will help us attract and retain skilled associates in the competitive marketplace for talent. We empower our associates to deliver a superior customer experience by living our values, and we position our associates to embody our core values by integrating the importance of our culture into ongoing development programs and rewards programs. Leaders participate in programs designed to build and strengthen our culture, such as training on leadership skills, cross-functional collaboration, leading with our values, and associate engagement. Our core values are at the root of our human capital management programs.
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Our Workforce. At the end of fiscal 2025, we employed approximately 472,400 associates, of whom approximately 53,400 were salaried, with the remainder compensated on an hourly basis. Set forth below is the geographic makeup of our workforce:
Geographic Location
Number of Associates
% of Total Workforce
United States
Canada
Mexico
Other (1)
Total
Note: Certain percentages may not sum to totals due to rounding.
(1) Includes associates in our sourcing organization located in India, Italy, Poland, Türkiye, Taiwan, Vietnam and China.
Additional information regarding our workforce, including the demographic data for our U.S. associates, can be found in our Fiscal 2024 Living Our Values Report, available on our investor relations website at https://ir.homedepot.com/sustainability.
Talent Attraction and Development. As we attract and hire new associates, we strive to create a customer-like experience for jobseekers as they move through the steps of our recruiting process. Jobseekers can apply for roles from anywhere using desktop or mobile devices. Once a jobseeker has applied for a role and has been selected to move forward in the recruiting process, we provide self-service for many of our positions by allowing jobseekers to schedule or reschedule pre-hire activities directly from their mobile device.
We offer our associates the opportunity to benefit from robust development opportunities. Our Home Depot University, or “HDU,” program, is a key part of this development, offering relevant content through multiple platforms, including instructor-led classes, e-learning, mobile learning, and additional online resources. We also invest in ongoing growth and development by providing coaching through continuous leader support and empowering our associates to learn new skills at their own pace through mobile applications that they can access at any time. We equip our leaders with the tools they need to develop themselves and their teams through several programs designed to help them lead effectively, empower their teams, and serve as mentors for our associates. We continually assess and refine our leadership structure throughout the organization to allow our associates to focus on training and development and to better serve our customers.
Associate Engagement. Associate engagement is the emotional commitment associates have to The Home Depot. It is vital to our culture and to our success. We foster an engaging workplace by continuously listening to and acting on associate feedback. Throughout the year, we provide several pulse check surveys to our associates that help us understand how emotionally connected those associates feel to our customers, the Company, their jobs, fellow associates, and leaders. In addition, our annual Voice of the Associate survey serves as our primary tool for gauging associates’ level of engagement within their roles. We use the insights from these surveys to help improve the overall associate experience. We also maintain digital associate engagement platforms that can connect associates with common interests and fuel connections to co-workers and Company leaders. Additionally, we have a number of programs to recognize stores and individual associates for exceptional customer service and demonstrating our core values.
Respect For All People. We strive to maintain a culture that welcomes everyone, and we believe it helps us achieve our business goals by driving excellent customer service and innovation, empowering our associates to thrive and excel, and enriching the communities in which we operate. This includes creating an environment where our associates feel valued and respected and providing equal opportunity for all of our associates.
Compensation and Benefits. Consistent with our core values, we take care of our people by offering competitive compensation and comprehensive benefits programs. We continue to make wage investments to ensure our compensation packages reflect the evolving circumstances across our markets. For instance, in Fiscal 2025, we made a significant investment in our people by increasing equity awards to our field leadership, including store managers and assistant store managers. Our profit-sharing programs for hourly associates also provide awards for performance against our business plan. Our associates can take advantage of a range of benefits, including healthcare and wellness programs, vacation and leave of absence benefits, including parental leave and paid sick/personal time off, a 401(k) match, our ESPPs, personal finance education and advisory services, assistance programs to help with managing personal and work-life challenges, family support programs, and educational assistance.
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Operate Sustainably
We have a long-standing commitment to reduce the impact that our operations and products have on the environment, which we believe helps make our business stronger, more agile, and more resilient. This approach extends from the products and services we offer to our customers; to our store construction, maintenance and operations; to our supply chain and packaging initiatives; and to our responsible sourcing program. As we strive to operate sustainably, we focus on sourcing products responsibly, driving innovation, and reducing our environmental impact.
Strengthen Our Communities
One of our core values is “Giving Back,” and we support our communities in a number of ways. The Home Depot Foundation, a nonprofit organization supported by Home Depot and our suppliers, focuses on improving the homes and lives of U.S. veterans, assisting communities affected by natural disasters, and helping prepare more people for careers in the skilled trades. The Company and The Home Depot Foundation partner with industry leaders through our Path to Pro programs on training programs to develop the next generation of skilled tradespeople and help them find careers in the home improvement industry, which includes a Home Depot-powered career networking site to connect jobseekers with Pros looking to hire skilled tradespeople. Our Team Depot associate volunteers also extend the mission of The Home Depot Foundation in communities across the country, donating thousands of volunteer hours each year to serve the needs of our communities. We also partner with a variety of suppliers and organizations to further support our efforts to strengthen the communities where our customers and associates live.
GOVERNMENT REGULATION
As a company with both U.S. and international operations, we are subject to the laws of the U.S. and foreign jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among jurisdictions. Compliance with these laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations, or competitive position as compared to prior periods.
AVAILABLE INFORMATION
Our primary internet website is www.homedepot.com. We make available on the Investor Relations section of our website, free of charge, our filings with the SEC. These filings include our annual reports to shareholders, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and Forms 3, 4 and 5 for our directors and certain of our officers, and amendments to those reports, as soon as reasonably practicable after filing such documents with, or furnishing such documents to, the SEC.
We include website addresses throughout this report for reference only. The information contained on our websites, including any document posted on or accessible through them, is not incorporated by reference into this report.
Item 1A. Risk Factors.
Our business, results of operations, cash flows, financial condition and prospects are subject to numerous risks and uncertainties. In connection with any investment decision with respect to our securities, you should carefully consider the following risk factors, as well as the other information contained in this report and our other filings with the SEC. These disclosures reflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company and its securities in the future. References to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impact our business operations. Should any of these risks materialize, our business, results of operations, cash flows, financial condition and prospects could be negatively impacted, which in turn could affect the trading value of our securities. You should read these Risk Factors in conjunction with Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes in Item 8.
STRATEGIC RISKS
A positive brand and reputation are critical to our business success, and, if our brand and reputation are damaged, it could negatively impact our relationships with our customers, associates and jobseekers, suppliers, service providers, vendors, shareholders, regulators, and the communities we serve, and, consequently, our business, results of operations and the price of our stock.
Our brand and reputation are critical to attracting customers, associates and jobseekers, suppliers, service providers, and vendors to do business with us. We must continue to manage and protect our brand and reputation.
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Negative incidents can erode trust and confidence quickly, and adverse publicity about us, regardless of its accuracy, the reputability of its source and whether we are involved in the incident, could damage our brand and reputation; undermine our customers’ confidence in us; reduce demand for our products and services, including as a result of boycotts; affect our ability to recruit, engage, motivate and retain associates; attract regulatory scrutiny or investigations; lead to litigation; and impact our relationships with current and potential suppliers and vendors. Third party actions, including our suppliers’, service providers’, and vendors’ business practices and positions, may also be attributed to us, regardless of the Company’s actions, meaning the actions of third parties pose similar risks to our brand and reputation. Partnerships with celebrities and social media content creators may also expose us to brand and reputational risks. Further, our actual or perceived position or of position on social, environmental, governance, political, public policy, regulatory, economic, geopolitical, or other sensitive issues, and any perceived of about those matters, could our reputation with certain groups and attract regulatory , , , or . In addition, we could be for the scope or nature of initiatives or goals related to these matters, or for any revisions to or to these goals on a timely basis or at all. If data, processes, and reporting related to these matters are or , we could face regulatory or , and/or reputational impacts. Customers are also increasingly using social media to provide feedback and information about the Company, including our products and services, in a manner that can be quickly and broadly disseminated. sentiment about the Company shared over social media, or from accounts impersonating the Company, could impact our brand and reputation, whether or not it is based in fact.
Strong competition could adversely affect prices and demand for our products and services and could decrease our market share.
Our industry is highly competitive, highly fragmented, and evolving. As a result, we face competition for customers for our products and services from a variety of retailers (including those operating reseller marketplaces), suppliers, service providers, distributors and manufacturers that sell products directly to their respective customer bases.
These competitors range from traditional brick-and-mortar, to multichannel, to exclusively online, and they include a number of other home improvement retailers; local, regional and national hardware stores; electrical, plumbing and building materials supply houses; and lumber yards. With respect to some products and services, we also compete with specialty design stores, showrooms, discount stores, paint stores, specialty and mass digital retailers, warehouse clubs, MRO distributors, national and local wholesale supply distributors, home décor retailers, and other retailers, as well as with providers of home improvement services and tool and equipment rental. Online and other digital capabilities, as well as AI tools, facilitate competitive entry, price transparency, and comparison shopping, increasing the level of competition we face.
We compete primarily based on customer experience; price; quality; product availability, assortment, and innovation; and delivery options and capabilities, both in-store and online. We also compete based on store and branch location and appearance, presentation of merchandise, and ease of shopping experience throughout every step of the customer’s project, from inspiration and research to any post-purchase support. Our Pros also look for dedicated sales support, competitive credit and pricing options, project planning tools, professional and reliable deliveries, and product depth and job lot quantities, particularly for their complex project needs. Furthermore, with respect to delivery options, customers are seeking faster and/or guaranteed delivery times, real-time updates on delivery status, low-price or free shipping, and/or convenient pickup options. Our ability to be competitive on delivery and pickup times, options and costs depends on many factors, including leveraging the momentum of our investments in our supply chain and our interconnected capabilities to further enhance the customer shopping experience. Failure to successfully manage these factors and offer competitive delivery and pickup options could negatively impact the demand for our products and services and our profit margins.
We use our marketing, advertising and promotional programs to drive customer traffic and compete more effectively, and we must regularly assess and adjust our efforts to address changes in the competitive landscape. Intense competitive pressures from one or more of our competitors, such as through aggressive promotional pricing or liquidation events, or our inability to adapt effectively and quickly to a changing competitive landscape, could adversely affect our prices, our margins, or demand for our products and services. If we are unable to timely and appropriately respond to these competitive pressures, including through the delivery of a superior interconnected experience leveraging both our digital and physical platforms, our market share and our financial performance could be adversely affected.
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We may not timely identify or effectively respond to customer needs, expectations or trends, which could adversely affect our relationship with our customers, the demand for our products and services, and our market share.
The success of our business depends on our ability to identify and respond promptly to evolving trends in demographics and shifts in customer preferences, expectations and needs, while also managing appropriate inventory levels in our stores, branches and distribution or fulfillment centers and maintaining an excellent customer experience. These trends include those driven by changes in the macroeconomic or political environment, geopolitical tensions or conflicts, military conflicts, or civil unrest, as well as unexpected weather conditions, natural disasters, or public health issues (including pandemics or quarantines and related impacts) that impact our customers. It is difficult to successfully predict the products and services our customers will demand. As our customers expect a more personalized experience, our ability to collect, use, retain, and protect relevant customer data is important for effectively meeting their expectations. Our ability to collect and use that data, however, is subject to a number of external factors, including the impact of legislation or regulations governing data privacy, data-driven technologies such as AI, and data security, as well as customer expectations around data collection, retention, and use. In addition, each of our primary customer groups has different needs and expectations, many of which evolve as the demographics in a particular customer group change. Customer preferences and expectations related to sustainability of products and operations are also changing. If we do not differentiate the shopping experience to attract our customers and meet their individual needs and expectations, it may impact our sales or our market share.
Customer expectations about the methods by which they find, evaluate, purchase and receive products or services are also evolving. Customers routinely and increasingly use technology and a variety of electronic devices and digital platforms to rapidly gather inspiration, compare products and prices, read product reviews, determine real-time product availability, and purchase products. New channels and tools to enhance the customer experience appear and change rapidly, and some of those technologies, such as generative and agentic AI tools, may dramatically change customer shopping and buying habits. Our Pros also look for additional capabilities, including dedicated sales support, competitive credit and pricing options, project planning tools, professional and reliable deliveries, and product depth and job lot quantities, particularly for their complex project needs. Once products are purchased, customers seek alternate options for delivery of those products, including advance ordering through digital platforms for Pros, and they often expect quick, timely, and low-price or free delivery, real-time updates on delivery status, and/or convenient pickup or delivery options. We must continually anticipate and adapt to these changes in the planning, shopping and purchasing process by continuing to adjust and enhance the online and in-store customer experience as well as our delivery options. The coordinated operation of our network of physical stores, branches, distribution facilities, and online platforms is fundamental to the of our interconnected strategy. We cannot guarantee that our current or future fulfillment options will be maintained and implemented or that we will be to meet customer expectations on delivery or pickup times, options and costs. In addition, as our customers continue to leverage our interconnected and fulfillment options, a concentration of online sales with direct fulfillment could result in a reduction in the amount of traffic in our stores, which would, in turn, reduce the for cross-selling of merchandise that such traffic creates and could reduce our overall sales and affect our financial performance. A concentration of online sales with direct fulfillment could also impact our profit margins.
Failure to provide a relevant and effective customer experience in a timely manner that keeps pace with technological developments and dynamic customer expectations; to maintain appropriate inventory; to provide quick and cost-effective or free delivery alternatives, real-time updates on delivery status, and convenient pickup options; to differentiate the customer experience for our primary customer groups; to effectively implement an appropriately localized merchandising assortment; or to otherwise timely identify or respond to changing customer preferences, expectations and home improvement needs could adversely affect our relationship with our customers, the demand for our products and services, and our market share.
The execution of initiatives to deliver our interconnected experience could adversely impact our business operations or financial results, and these initiatives might not provide the anticipated benefits.
Over the past several years, we have made significant investments to deliver a frictionless interconnected experience, including enhancing and expanding our supply chain, developing differentiated capabilities for our customers, including enhancements and improvements to our digital capabilities, expanding our store base, and making strategic acquisitions. These investments are designed to streamline our operations to allow our associates to continue to provide high-quality service to our customers; simplify customer interactions; provide our customers with a more interconnected experience; expand our sales to Pros and better address their needs for complex projects; and create the fastest, most efficient, and most reliable delivery network for home improvement products.
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Executing our interconnected experience requires continual investment in our operations and information technology systems, as well as the development and execution of new processes, systems and support. In addition, our stores are a critical component of our interconnected experience, serving as the hub of our customers’ interconnected shopping journey. We have an aging store base that requires maintenance, investment, and space reallocation initiatives to deliver the shopping experience that our customers desire. We also need to identify and secure available locations with appropriate characteristics for new stores, branches, and supply chain facilities to ensure we can continue to serve our customers effectively.
We must effectively manage the volume, timing, nature, location, and cost of our investments, projects and changes. Failure to continue to make investments to effectively support our strategy and to implement or integrate those investments in the right manner and at the right pace could adversely impact our business operations or financial results. The cost and potential problems, defects of design, and interruptions associated with the implementation of these initiatives, including those associated with managing third-party service providers, employing new online tools and services, implementing new technologies using AI, implementing and restructuring support systems and processes, securing appropriate store and other facility locations, and addressing impacts on inventory levels, could disrupt or reduce the efficiency of our operations in the near term, lead to product availability issues, create complexity in our systems and operations and impact our profitability. Our investments to enhance our interconnected experience, including investments in our store base, supply chain, and differentiated capabilities, including our digital assets, might not provide the anticipated benefits, or might take longer than expected to complete, integrate or realize anticipated benefits, any of which could impact our competitive position and our financial condition, results of operations, or cash flows.
If we are unable to effectively manage and expand our strategic alliances and relationships with certain suppliers of both brand name and proprietary products, we may be unable to effectively execute our strategy to differentiate ourselves from our competitors.
As part of our focus on product differentiation, we have formed strategic alliances and exclusive relationships with certain suppliers to market products under a variety of well-recognized brand names. We have also developed relationships with certain suppliers to allow us to offer proprietary products that are comparable to national brands. These proprietary products help differentiate us from other retailers and generally carry higher margins than national brand products. If we are unable to effectively manage and expand these strategic alliances and relationships, maintain favorable terms with current suppliers, or identify alternative sources for comparable brand name and proprietary products, we may not be able to effectively execute product differentiation, which may impact our sales and gross margin. Additionally, our suppliers’ business practices and positions may also be attributed to us, regardless of the Company’s actions, meaning that controversies regarding our suppliers of brand name or proprietary products could pose risks to our reputation and brand, and may require us to quickly identify alternative sources for comparable products.
Our strategic transactions involve risks, which could have an adverse impact on our business, financial condition and results of operations, and we may not realize the anticipated benefits of these transactions.
We regularly consider and enter into strategic transactions, including mergers, acquisitions, investments, alliances, and other growth and market expansion strategies. We generally expect that these transactions will result in sales increases, cost savings, synergies, enhanced capabilities, and/or various other benefits. Assessing the viability and realizing the benefits of these transactions is subject to significant uncertainty. For each of our acquisitions, we need to determine the appropriate level of integration of the target company’s products, services, associates, and information technology, financial, human resources, compliance, and other systems and processes, and then successfully manage that integration into our corporate structure. Integration is a complex and time-consuming process, and if the integration is not fully successful or is delayed for a material period of time, we may not achieve the anticipated synergies, cost savings, enhanced capabilities, or other benefits of the acquisition. In addition, the integration of businesses may create increased complexity in our financial systems, internal controls, technology and cybersecurity systems, and operations and may make them more difficult to manage. Even if the target companies are integrated, the acquisitions may to further our business strategy as anticipated, us to increased competition or with respect to our products or services, and us to additional or risks and liabilities. Strategic transactions may also be subject to significant regulatory uncertainty, and changes in the regulatory landscape may result in additional costs or that affect the anticipated outcome of a transaction. Any in the execution of a strategic transaction or investment, our approach to the integration of an acquired asset or business, our ability to integrate new associates, or of anticipated synergies or other benefits could result in growth, higher than expected costs, the recording of an of goodwill or other intangible assets or costs, and other actions which could affect our business, financial condition and results of operations.
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OPERATIONAL RISKS
A failure of one or more key elements of our technology infrastructure, including associated systems or processes, could adversely affect our business, financial results, and reputation.
We rely extensively on our technology infrastructure, including associated information technology systems, applications, processes, and related personnel to operate our day-to-day business and to collect, use, retain, manage, transmit, and protect transactions and data. Some of these systems are managed or provided by third-party service providers, including certain cloud platform providers. In managing our business, we also rely heavily on the integrity of, security of, and consistent access to, systems that provide operational and financial data and capabilities related to sales (both in store and online), customer data, supplier data, associate data, jobseeker data, partner data, demand forecasting, merchandise ordering, inventory replenishment, supply chain management, payment processing, order fulfillment, customer service, and post-purchase support. For these information technology systems, applications, and processes to operate effectively, we or our service providers must maintain and update them. Delays in the maintenance, updates, upgrading, or patching of these systems, applications or processes, as well as the actions taken to maintain, update, upgrade and patch, could, and on occasion have, impaired their operation and effectiveness or exposed us to security risks. Our technology infrastructure and the third-party systems with which we interact, as well as any systems those third parties utilize, are subject to, and on occasion have experienced, , , or activity from a number of causes, including power and other infrastructure ; computer and telecommunications ; computer viruses; data or security ; internal or external data theft or ; cyber-attacks, including the use of codes, worms, phishing, smishing, vishing, spyware, of service attacks, and ransomware; responsive containment measures by us that may involve voluntarily taking systems offline; natural and events such as fires, floods, earthquakes, tornadoes, hurricanes, or other extreme weather events; public health , such as pandemics and quarantines; geopolitical tensions or , military , acts of war, terrorism or civil ; other systems ; or redundancy; and design or usage or by our associates, contractors or third-party service providers. In addition, as more business activities have shifted online, and as certain of our support center associates work in a remote or hybrid environment, we continue to face an increased risk due to the potential of internal or external technology infrastructure as well as increased cybersecurity and attempts to our security networks.
Although we and our third-party service providers seek to maintain our respective technology infrastructure and related systems and processes effectively and to successfully address the risk of compromise of their integrity, security and consistent operations of these systems, such efforts are not always successful. As a result, we or our service providers could experience, and on occasion have experienced, errors, interruptions, delays or cessations of service in key portions of our technology infrastructure, which could significantly disrupt our operations or impair data security; prevent us from efficiently accepting or fulfilling orders or providing services to customers; impact our ability to operate or access communications, financial or banking systems; be costly, time-consuming and resource-intensive to remedy; and adversely impact our reputation and relationship with our customers, associates, suppliers, shareholders or regulators. We may have to expend significant resources to mitigate the impact of any , , or cessations of service and may have recourse service providers who experience such events.
In addition, we are currently making, and expect to continue to make, substantial investments in our technology infrastructure, systems, processes, and personnel, in certain cases with the assistance of strategic partners and other third-party service providers. These investments involve replacing existing systems, some of which are older, legacy systems that are less flexible and efficient, with successor systems, and updating applications and websites; outsourcing certain technology and business processes to third-party service providers; making changes to existing systems, including the migration of applications to the cloud; maintaining or enhancing legacy systems that are not currently being replaced; designing or cost-effectively acquiring new systems with new functionality; or testing, developing and deploying AI tools, including generative AI. These efforts could result, and on occasion have resulted, in significant potential risks, including failure of the technology infrastructure to operate as designed, unexpected impacts on related systems or processes, potential loss or corruption of data, failures in security processes and internal controls, cost overruns, implementation or , of operations, and the potential to meet business and reporting requirements. Any technology infrastructure implementation and transition may result in operational , security or internal control , reputational , sales, increased costs, or other financial that could affect our business, our relationships with our customers, and results of operations.
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Disruptions in our customer-facing technology infrastructure could impair our interconnected experience strategy and give rise to negative customer experiences, damage our brand and reputation and adversely impact our sales.
Through our technology infrastructure, we are able to provide an improved overall shopping and interconnected experience that empowers our customers to shop and interact with us from a variety of electronic devices and digital platforms at each stage of their shopping journey. We use our digital platforms as sales channels for our products and services, as methods of providing inspiration, and as sources of product, project, and other relevant information to our customers to help drive sales. In addition to supporting our DIY and DIFM customers, we make other resources available that are designed to serve the needs of Pros, including those working on complex projects. We also have multiple online communities, digital platforms, and knowledge centers that allow us to inform, assist and interact with our customers. The retail industry is continually evolving and expanding, with a significant increase in sales initiated online and via mobile applications in recent years. We may not be successful at managing this increased volume and related delivery options without interruption in the future. Additionally, we must effectively respond to new developments and changing customer preferences with respect to a complex, evolving digital and interconnected experience, including adopting AI tools and other technology to serve our customers. We continually seek to all of our online and digital platforms to provide a personalized, user- interface for our customers. , , , , or other performance issues in or with our customer-facing technology systems, either due to increased volumes, system or other technology modifications, cybersecurity or attacks, information technology or other , launches of new or emerging technologies; or other factors, or a of these systems to meet our or our customers’ expectations, could the value they provide, our brand and reputation, and impact our sales.
Disruptions in our supply chain and other factors affecting the availability and distribution of our merchandise could adversely impact our business, financial results, and reputation.
Disruptions within our logistics or supply chain network, such as the industry-wide supply chain challenges that resulted from the COVID-19 pandemic, have adversely affected and may in the future adversely affect, our ability to receive and deliver inventory in a timely manner, impair our ability to meet customer demand for products, and result in lost sales, increased costs, and/or damage to our reputation. Such disruptions may result, and on occasion have resulted, from damage or destruction to our distribution or fulfillment centers or those of our supply chain service providers; weather-related events; cybersecurity incidents or attacks; information technology outages or other interruptions; natural disasters; international trade , trade policy changes or restrictions, or import- or export-related governmental sanctions or restrictions; customs actions, including regulatory enforcement inquiries, holds, , and exclusions; quotas, tariffs or other import-related taxes; strikes, lock-outs, work or ; of supply chain labor, including truck drivers; shipping capacity constraints, including of related equipment; raw material or other ; third-party contract or to maintain contract terms; supply or shipping or costs; increased costs or of fuel; political ; geopolitical tensions or , or military or acts of war, as well as any related sanctions or other government or private responses; acts of terrorism; civil ; public health issues, including pandemics or quarantines and other related impacts; or other factors beyond our control. In recent years, ports in the U.S. and elsewhere have been impacted by capacity constraints, port congestion and , periodic labor , strikes, security issues, weather-related events, and natural or man-made .
These types of disruptions place strain on the domestic and international supply chain, which has affected in some circumstances, and may in the future negatively affect, the flow or availability of certain products. Even when we are able to find alternate sources for certain products, they may cost more or require us to incur higher transportation costs, which could adversely impact our profitability and financial condition. Increased demand for online purchases of products can impact, and in the past has impacted, our fulfillment operations, as well as those of our third-party carriers, resulting in delays in delivering products to customers and increases in our out-of-stock levels.
We and our suppliers have experienced, and may experience in the future, labor shortages at some of our distribution and fulfillment centers both due to the competitive labor market and unexpected events such as pandemics and quarantines. Such labor shortages, whether temporary or sustained, may adversely impact the flow or availability of products to our stores and customers.
Any of these circumstances could impair our ability to meet customer demand for products and result in lost sales, increased costs, or damage to our reputation, any of which could negatively impact our business performance or financial condition.
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Failure to maintain a safe and secure shopping and working environment may adversely impact sales, costs, the customer and associate experience, and our brand and reputation.
Our customers and associates expect a safe and secure environment in which to shop and work, and maintaining that environment helps protect against inventory losses (also called “shrink”), including due to theft. Like other retailers, we saw heightened shrink in recent years, particularly as a result of organized retail crime. While we have a number of initiatives in place to address shrink, minimize theft, and maintain safety in and around our stores and other facilities, these efforts require operational changes that may increase costs and reduce margins, and they can negatively impact the customer or associate experience. Furthermore, an unsafe environment or negative publicity regarding the Company or regarding incidents in or around our stores and/or other facilities, such as civil unrest, raids, protests, or similar activities, may diminish trust and confidence with customers, associates, and jobseekers, which can adversely impact traffic in our stores, sales, associate recruiting, morale, and retention, and our brand and reputation.
If our efforts to maintain the privacy and security of customer, associate, jobseeker, business partner, and Company information are not successful, we could incur substantial costs and reputational damage and could become subject to litigation and enforcement actions.
Our business, like that of most retailers, involves the collection, use, retention, management, transmission, and deletion of personal information (including identifiers, localization, internet activity, preferences, and payment information) from our customers, associates, jobseekers, and business partners, as well as confidential Company information. We also work with third-party service providers that provide technology, systems and services that we use in connection with the handling of information. Our information systems, and those of our third-party service providers, are vulnerable to continually evolving data protection and cybersecurity risks. Despite our efforts, our cybersecurity risk management processes may not be fully implemented, complied with or effective in preventing or mitigating future cybersecurity risks. Unauthorized parties, including criminal threat actors, nation-states, or insiders (including associates or contractors engaged in fraudulent or malicious activities), have in the past gained access, and will continue to attempt to access, to these systems and data through technical , of security policies, or other means of or our associates, contractors or third-party service providers, which could the confidentiality, , or availability of such information systems or data that we may handle. Hardware, software or applications we develop or obtain from third parties may contain, and on occasion have contained, exploitable , bugs, or in design, maintenance or manufacture or other that could compromise information security. We have experienced and continue to face the ongoing risk of of our software providers and our software development and implementation process, including from coding and process and the installation of so-called back doors that provide access to systems and data, and through access to or theft of our intellectual property. The continued availability of remote or hybrid working arrangements has also expanded the possible attack surface areas and increased risks posed by insider , as our interactions with associates, contractors and third-party service providers increasingly occur on information systems, networks and environments over which we have less control and which may be more to monitor. In addition, the risk of cyber-attacks has increased in connection with geopolitical tensions or and ongoing trade and diplomatic tensions. In light of the in Europe, the Middle East and South America and other geopolitical events, nation-state actors or their supporters and other politically-motivated actors may launch cyber-attacks, and may attempt to cause supply chain and other third-party service provider , or take other geopolitically-motivated actions that may our business operations, result in data compromise, or both. Nation-state actors have in the past carried out, and may in the future carry out, cyber-attacks to their aims and goals, which may include espionage, monetary , , and . Similarly, there may be increased activities by organized or coordinating groups of cyber who seek to attack larger organizations’ data or systems for their own aims and goals, which can include financial . The availability of AI may new types of actors who may not otherwise have had the capabilities to engage in activity to do so, or may the capabilities of nation-state actors or organizing or coordinating groups to carry out attacks, or may generally novel types of attacks to be developed and deployed. Because the techniques that actors use to obtain access, disable or service, or systems, including use of passwords, social engineering, phishing, smishing, vishing, identity spoofing (including through the use of emerging technologies such as deep fakes), ransomware or other and malware, supply chain compromises, insider , and man-in-the-middle and of service attacks, change frequently and may not immediately produce signs of activity or compromise, we may be to anticipate or detect these techniques or implement adequate preventative measures.
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The ever-evolving cybersecurity threat landscape means that we and our third-party service providers and business partners must continually evaluate and adapt our respective systems and processes and overall security environment, as well as those of companies we or they acquire. There is no guarantee that the measures we take will be adequate to safeguard against all threats, including vulnerabilities, data security breaches, system compromises or misuses or loss of data. As we have experienced in the past, any significant compromise or breach of our data security, whether external or internal, or misuse of customer, associate, jobseeker, business partner, or Company data, could result in significant costs, including costs to investigate, mitigate, and remediate, as well as lost sales, fines, lawsuits, regulatory investigations, and to our reputation. Additionally, as we have experienced in the past, we or our third-party service providers may not discover any , data security , system compromise, or data or for a significant period of time after the occurrence of a security . When our systems or those of our third-party service providers on which we rely are or attacked, we may also , and on some occasions have , an , , or of data or information technology systems, cessations of service, and to our business operations while such or attack is being remedied; this may impact data or systems operated by us or by third-party service providers. Furthermore, our cyber insurance coverage may not be adequate for liabilities or costs actually incurred, and we cannot be certain that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not coverage of a future claim.
Data governance failures can also adversely affect our reputation and business. Our business depends on our customers’, associates’, jobseekers’, contractors’, and business partners’ willingness to entrust us with their personal information. Events that adversely affect that trust, including inadequate disclosure to our customers, associates, jobseekers, contractors, or business partners of our uses of their information or failing to keep our information technology systems and our customers’, associates’, jobseekers’, contractors’, and business partners’ personal information secure from significant attack, theft, damage, loss or unauthorized or unintended disclosure or access, whether as a result of our action or inaction (including human error or malfeasance) or that of our service providers or other third parties, could adversely affect our brand and our reputation.
The regulatory environment related to data privacy, cybersecurity, and AI and other emerging technologies is constantly changing, with new and increasingly rigorous requirements applicable to our business. The implementation of these requirements has also become more complex. Maintaining our adherence to evolving data privacy and cybersecurity regulatory requirements, including state and international privacy laws, requires significant effort and cost, requires changes to our business practices, and may limit our ability to collect and use certain data for our business operations, including to support the customer experience. In addition, many regulators have indicated an intention to take more aggressive enforcement actions regarding data privacy and cybersecurity matters, and private litigation resulting from such matters is increasing and resulting in progressively larger judgments and settlements. Complying with current or contemplated information security, cybersecurity, data privacy, data protection, and data processing laws and regulations (including reporting and disclosure regimes), or any failure to comply, could cause us to incur substantial costs. As we have experienced in the past, failure to comply with applicable requirements could subject us to fines, sanctions, governmental investigations, or lawsuits, which could lead to negative publicity and reputational , and may cause customers to confidence in the effectiveness of our cybersecurity measures, data privacy practices, or our business more generally.
Our success depends upon our ability to attract, develop and retain highly qualified associates to provide excellent customer service and to support our strategic initiatives while also controlling our labor costs.
Our customers expect a high level of customer service and product knowledge from our associates. To meet the needs and expectations of our customers, we must attract, develop and retain a large number of highly qualified associates, including those with specialized product and project knowledge who can help serve our Pros, and maintain a productive relationship with those associates. Our ability to meet our labor needs while controlling labor costs is subject to numerous factors, including increased market pressures with respect to prevailing wage rates, unemployment levels, and health and other insurance costs; the impact of legislation or regulations governing labor relations, employment, immigration, minimum wage, and healthcare benefits; changing demographics and expectations among the workforce; safety and security in our stores and other facilities; and our brand and reputation within the labor market. We compete with other retail businesses for many of our associates in hourly positions, and we invest significant resources in training and motivating them to maintain a high level of job satisfaction. These positions often have high turnover rates, which can lead to increased training and retention costs, particularly in a competitive labor market. We have faced and may continue to face additional challenges in recruiting and retaining associates due to wage pressure; flexible scheduling needs; health and safety concerns; and related to a remote or hybrid working environment for associates who work in our support centers. These factors, together with competition among potential employers, have resulted in and may continue to result in
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increased compensation costs, and/or may impair our ability to recruit and retain associates, which could have an adverse impact on our business operations, financial condition and results of operations. A limited number of our associates are represented by labor unions, and we may be subject to future labor union efforts to organize groups of our associates from time to time. If successful, those organizational efforts may decrease our operational flexibility and efficiency, and/or otherwise negatively impact our operations or reputation.
In addition, to deliver our interconnected customer experience, we must attract and retain a large number of skilled professionals, including technology professionals, to implement our ongoing technology and other investments. The market for these professionals is very competitive. Not providing competitive wages and/or benefits, including remote or hybrid work flexibility, within the markets in which we operate could adversely affect our ability to retain and attract associates.
Additionally, our ability to successfully execute organizational changes, including management transitions within the Company’s senior leadership, and to effectively motivate, integrate, and retain associates is critical to our business success. If we are unable to attract, develop or retain qualified associates, or manage leadership transitions successfully, our ability to effectively implement our strategy may be negatively impacted, the quality of service we provide to our customers may decrease, and our financial performance may be adversely affected.
We are subject to payment-related risks that could increase our operating costs, expose us to fraud or theft, subject us to potential liability, and potentially disrupt our business.
We accept payments using a variety of methods, including credit and debit cards, our PLCCs, cash, electronic payments, checks, digital wallets, loan programs including installment loans, trade credit, and gift cards, and we may offer new payment options over time. As we offer new payment options to our customers, we may be subject to additional rules, regulations, and compliance requirements, and higher fraud losses. Acceptance of these payment options subjects us to rules, regulations, contractual obligations and compliance requirements, including payment network rules and operating guidelines, data security standards and certification requirements, and rules governing electronic funds transfers. These rules and requirements may change over time or be reinterpreted, making compliance more difficult, costly, or uncertain. For certain payment methods, including credit and debit cards, we pay interchange fees and other costs to accept these payments, and we may also incur losses, all of which may increase over time and raise our operating costs. We rely on third parties to provide payment processing services, including the processing of credit cards, debit cards, and other forms of electronic payment. If these companies become unable to provide these services to us, or if their systems are compromised or do not operate as intended, it could our business. The payment methods that we offer, and the selling channels in which we operate, also subject us to and theft by actors, who are becoming increasingly more sophisticated, including by using means such as AI, seeking to obtain access to or that may exist in our sales, payments, and payment processing systems. If we to comply with applicable rules or requirements for the payment methods we accept, or if payment-related data is compromised due to a or of data, we may be liable for costs incurred by payment card issuing banks and other third parties or we may be subject to and higher transaction fees, or our ability to accept or facilitate certain types of payments may be .
Trade credit offerings are an important part of serving Pros, including SRS customers, and we anticipate expanding our Pro Trade Credit program as we further develop our capabilities. If we fail to offer attractive terms or services, or employ underwriting criteria that are not competitive, our ability to grow our sales to these Pros may be adversely impacted. If our Pros are unable to make their payments, we may experience losses. In addition, our customers could lose confidence in certain payment types, or may expect or demand payment methods that we do not currently offer, which could result in competitive disadvantages or require a shift to other payment types or potential changes to our payment systems that may result in higher costs or present other risks. As a result, our business and operating results could be adversely affected.
Natural disasters, unseasonable, unexpected or extreme weather conditions, as well as other catastrophic or uncharacteristic events, could impact our operations and financial results, seasonal events such as storms may impact sales compared to prior periods, and the potential impacts of catastrophic or uncharacteristic events may lead to changes in demand or availability of products or cause business interruptions.
Natural disasters, such as hurricanes, tropical storms, fires, floods, droughts or water scarcity, tornadoes, and earthquakes; unseasonable, unexpected or extreme weather conditions; acts of terrorism or violence, including active shooter situations; public health concerns, such as pandemics and quarantines and related impacts; civil unrest; geopolitical tensions or conflicts, or military conflicts or acts of war, as well as any related sanctions or other government or private responses; or similar disruptions and catastrophic events could have and on occasion have had an adverse effect on our operations and financial performance in a number of ways. These types of events can
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affect consumer spending and confidence and consumers’ disposable income, particularly with respect to home improvement or construction projects. They can also adversely affect our work force and prevent associates and customers from reaching our stores, branches and other facilities. They can, temporarily or on a long-term basis, disrupt or disable the operations of stores, branches, other facilities and support centers, and portions of our supply chain and distribution network, including causing reductions in the availability of inventory and disruptions of utility services. In addition, these events may affect our information systems and digital platforms, resulting in disruptions to various aspects of our operations, including our ability to transact with customers and fulfill orders; to communicate with our stores, branches, other facilities or support centers or senior management; or to access financial or banking systems. Unseasonable, unexpected or extreme weather conditions such as excessive precipitation, warm temperatures during the winter season, or prolonged or extreme periods of warm or cold temperatures could render a portion of our inventory with customer needs and impact our financial results.
Demand for certain of our products has historically been influenced by the occurrence of seasonal events, such as storms. The impact of these events on our sales varies depending on their location, frequency and magnitude. Sustained periods without such events can lead, and in the past have led, to lower sales compared to prior periods.
Furthermore, the potential long-term impacts of climate change, whether involving physical risks (such as extreme weather conditions) or transition risks (such as regulatory or technology changes), could be widespread and unpredictable. Over time, these changes could affect, for example, the availability and cost of or demand for certain products, commodities, and energy (including utilities), which in turn may impact our ability to procure certain goods or services for the operation of our business at the quantities and levels we consider optimal.
As a consequence of these or other catastrophic or uncharacteristic events, we may experience interruption to our operations, increased costs, changes in customer behavior or demand, or losses of property, equipment or inventory, any of which could adversely affect our sales and profitability.
If we fail to identify and develop relationships with a sufficient number of qualified suppliers, or if our suppliers experience financial difficulties or other challenges, our ability to timely and efficiently access products that meet our high standards for quality could be adversely affected.
We buy our products from suppliers located around the world, who in turn procure materials from across the globe. Our ability to continue to identify and develop relationships with qualified suppliers who can meet our standards for quality and responsible sourcing, as well as our need to access products in a timely and efficient manner, is a significant challenge. Our ability to access products from our suppliers can be, and on occasion has been, adversely affected by economic or political instability; civil unrest; geopolitical tensions or conflicts, or military conflicts or acts of war, as well as any related sanctions or other government or private responses; acts of terrorism or violence; public health issues (including pandemics and related impacts); the financial instability of suppliers; suppliers’ noncompliance with applicable laws; contract disputes or inability to maintain contract terms; trade restrictions; tariffs; currency exchange rates; in our suppliers’ logistics or supply chain networks or information technology systems; to sell certain products due to customs actions, including regulatory enforcement inquiries, holds, , and exclusions; raw material or other ; actual, potential or perceived with our standards for suppliers or other regarding suppliers’ business practices or operations; and other factors beyond our or our suppliers’ control. If we are to access products to meet our customers’ demands and expectations in a timely and manner, our sales and gross margin may be impacted.
Failure to achieve and maintain a high level of product and service quality and safety and ensure compliance with responsible sourcing laws and standards could damage our reputation with customers, expose us to litigation or enforcement actions, and negatively impact our sales and results of operations.
Product and service quality issues could negatively impact customer confidence in our brands and the Company. If our product and service offerings, including those of our suppliers, do not meet applicable product standards or our customers’ expectations regarding safety, quality , security, or responsible business practices, we could experience lost sales and increased costs and be exposed to legal, financial and reputational risks, as well as governmental enforcement actions. Actual, potential or perceived product safety or security concerns, including health- or privacy- related concerns, could expose, and in some cases have exposed, us to litigation or governmental enforcement actions, and could result in costly product recalls and other liabilities. For any actions related to actual, potential, or perceived product-safety concerns, we may not be successful in obtaining adequate contractual indemnification and insurance coverage from our suppliers and service providers, which may result in having an effect on our business, financial condition and results of operations. Furthermore, our delivery operations and reliance on third-party carriers us to potential liability for property , personal , or vehicular , which
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could result in financial losses and reputational harm. Even with adequate insurance and indemnification, our reputation as a provider of high-quality products, including both national brand names and our proprietary products, and services could suffer, damaging our reputation and impacting customer loyalty.
In addition, we and our customers have expectations around responsible sourcing. Under our standard supplier buying agreements, our suppliers must comply with our responsible sourcing standards, which cover a variety of expectations across multiple areas, including supply chain transparency, health and safety, environmental laws and regulations, compensation, hours of work, and prohibitions on child and forced labor. Further, suppliers must comply with Company policies and applicable law, including applicable laws governing the sourcing of raw materials, such as timber and minerals, used in our products. However, we are also dependent on our suppliers to ensure that the products and services we provide to our customers comply with our standards and applicable law, including with respect to information provided by suppliers to government agencies about the source of the products or the constituent elements of those products. Further, the supply chain for some of the products we sell may be too attenuated for us to know with certainty the source of their components, such as timber, minerals, or other raw materials. Actual, potential, or perceived supplier non-compliance with our standards or applicable law — including allegations of non-compliance raised by non-governmental organizations or in third-party reports — could, and in certain instances in the past has, exposed us to litigation or governmental enforcement actions and resulted in product ; resulted in to sell certain products due to to meet our standards or due to customs actions, including regulatory enforcement inquiries, holds, , and exclusions; impacted our reputation; and resulted in of supplier relationships and/or other liabilities.
Our proprietary products subject us to certain increased risks, including regulatory, product liability, intellectual property, supplier relations, and reputational risks.
In addition to other product-related risks discussed in this section, as we expand our proprietary product offerings, we may become subject to increased risks due to our greater role in the design, manufacture, marketing and sale of those products. The risks include greater responsibility to administer and comply with applicable regulatory requirements, increased potential product liability and product recall exposure, and increased potential reputational risks related to the responsible sourcing of those products. To effectively execute on our product differentiation strategy, we must also be able to successfully protect our proprietary rights and successfully navigate and avoid claims related to the proprietary rights of third parties. In addition, an increase in sales of our proprietary products may adversely affect sales of our suppliers’ products, which in turn could adversely affect our relationships with certain of our suppliers. Any failure to appropriately address some or all of these risks could our reputation and have an effect on our business, results of operations, and financial condition.
If we are unable to effectively manage our installation services business, we could lose sales and be subject to fines, lawsuits, reputational damage or the loss of our general contractor licenses.
We act as a general contractor to provide installation services to our DIFM customers through professional third-party licensed and insured installers. As such, we are subject to regulatory requirements and risks applicable to general contractors, which include management of background checks, licensing, permitting, and handling of environmental risks, as well as quality of work performed by our third-party installers. We have established processes and procedures to manage these requirements and manage customer satisfaction with the services provided by our third-party installers. However, as we experienced in part with the EPA investigation and the resulting consent decree in April 2021, and the subsequent discussions with the EPA regarding compliance with the consent decree, if we fail to manage these processes effectively, collect the appropriate documentation, perform regular job site inspections, or provide proper oversight of these services, we could lose sales or face fines or lawsuits, including governmental enforcement actions for violations of regulatory requirements, as well as claims for property damage or personal injury. In addition, we may to our reputation or the of our general contractor licenses, which could affect our business.
MARKET, LEGAL, FINANCIAL, REGULATORY, AND OTHER EXTERNAL RISKS
Adverse conditions in or uncertainty regarding the housing and home improvement markets, economic conditions, political and social climate, public health issues, and other factors beyond our control could adversely affect demand for our products and services, our costs of doing business, and our financial performance.
Our financial performance depends significantly on the stability of the housing and home improvement markets, as well as general economic conditions, including changes in gross domestic product. Adverse conditions in or uncertainty about these markets, the economy, or the political or social climate could adversely impact, and we believe in some cases has adversely impacted, our customers’ confidence or financial condition, causing them to
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decide against purchasing home improvement products and services, causing them to delay purchasing decisions, or impacting their ability to pay for products and services. Other factors beyond our control – including unemployment and foreclosure rates; inventory loss due to theft (including as a result of organized retail crime); inflation or deflation; interest rate fluctuations, including central banks’ actions to control inflation; tariff and trade policy; fuel and other energy costs; raw material or other shortages; labor and healthcare costs; the availability of financing; the state of the credit markets, including mortgages, home equity loans and consumer credit; changes in policy and regulations, including with respect to tax rates; prolonged government shutdowns; weather and natural disasters (including the potential impacts of climate change); acts of terrorism or violence, including active shooter situations; public health issues, including pandemics or quarantines and related impacts; geopolitical tensions or , or military or acts of war, as well as any related sanctions or other government or private responses; civil , and potential societal shifts in investment in large home projects could further affect, and in certain cases has affected, demand for our products and services, our costs of doing business, and our financial performance. For instance, the high interest rate environment that throughout fiscal 2025 and the significant increase in home prices in recent years have impacted housing affordability. Together, these factors have contributed to historically low levels of housing turnover, which has reduced demand for projects and other purchases associated with buying and selling a home.
Further, our specialty trade and MRO customers, who have higher spend and longer-term relationships than a typical retail customer, increasingly use trade credit to finance their purchases, as do some of our other Pros in order to purchase our products. Their ability to pay is highly dependent on the economic strength of the industry in which they operate. If these customers are unable to repay the trade credit invoice, we may face greater default risk, which could reduce our cash flow and adversely affect our results of operations.
Our costs of doing business could increase as a result of changes in, expanded enforcement of, or adoption of new federal, state, local or international laws, regulations and executive orders.
We are subject to various U.S. federal, state and local laws and regulations, as well as international laws and regulations, that govern numerous aspects of our business. In recent years, a number of new laws and regulations have been adopted, new executive orders have been announced, there has been expanded enforcement and differing interpretations of certain existing laws and regulations by federal, state, local and international agencies, and the interpretation of certain laws and regulations has become increasingly complex. These laws and regulations, and related executive orders, interpretations and enforcement activity, may change as a result of a variety of factors, including political, economic or social events. Changes in, expanded regulatory investigations or enforcement of, litigation regarding, or adoption of new federal, state, local or international laws, regulations and/or executive orders governing minimum wage or living wage requirements; the classification of exempt and non-exempt employees; the distinction between employees and contractors; diversity, equity, and inclusion programs; immigration; and other human capital management matters; healthcare; data privacy, governance, and cybersecurity; the sale, marketing, sourcing, and pricing of our products; transportation, logistics and interstate delivery operations, including Department of Transportation regulations on vehicles and drivers; international trade and tariffs; supply chain transparency; the sourcing of raw materials, including timber and minerals, used in our products; taxes, including changes to corporate tax rates; restrictions on carbon dioxide and other greenhouse gas emissions; competition and requirements and enforcement; sustainability programs, and reporting; unclaimed property; energy costs and consumption; or waste disposal and other environmental matters, including with respect to our installation services business, could increase our costs of doing business or impact our sales, operations or .
In addition, regulators, customers, shareholders, associates, and other stakeholders remain focused on cybersecurity, data privacy, human capital management and sustainability matters and related disclosures. These changing rules, regulations and stakeholder expectations have resulted in, and may continue to result in, increased general and administrative expenses, heightened risks of litigation and enforcement actions, and increased management time and attention spent complying with or meeting such regulations and expectations. Initiatives and goals related to these matters could be difficult and expensive to implement, the technologies needed to implement them may not be cost effective and may not advance at a sufficient pace or scale, and we could be criticized or face reputational or regulatory risks regarding the accuracy, adequacy or completeness of the disclosures.
Regulators, customers, and other stakeholders are also increasingly focusing on federal, state, and local consumer-protection laws and regulations, including those that could relate to how Home Depot prices, discounts, or advertises the products that it sells. This increased attention has resulted in and may continue to result in increased general and administrative expenses, heightened risks of litigation and enforcement actions, and increased management time and attention spent on managing the Company’s response to those matters and its compliance with consumer-protection laws and regulations.
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If we cannot successfully manage the challenges presented by operating in international markets, we may not be successful in our international operations and our sales and profitability may be negatively impacted.
Our ability to successfully operate in, and source products and materials from, international markets is affected by many of the same risks we face in our U.S. operations, as well as other costs and difficulties specific to managing international operations. Our international operations, including any expansion in international markets, may be, and on occasion have been, adversely affected by local laws and customs, U.S. laws or administrative actions applicable to foreign operations and other foreign legal and regulatory constraints, as well as political, social and economic conditions. Risks inherent in international operations also include, among others, potential adverse tax consequences; international trade disputes, trade policy changes or tariffs and other import-related taxes, fees and controls; inability to sell certain products due to customs actions, including regulatory enforcement inquiries, holds, detentions, and exclusions; greater difficulty in enforcing intellectual property rights; limitations on access to ports; risks associated with the Foreign Practices Act and local anti- law compliance; geopolitical tensions or , military or acts of war, as well as any related sanctions or other government or private responses; compliance with labor laws; compliance with environmental and responsible sourcing laws and regulations; and in identifying and access to local suppliers. For example, trade tensions between the U.S. and numerous other countries have led to a series of tariffs on the importation of certain product categories since the beginning of fiscal 2025. Following the recent U.S. Supreme Court decision that struck down tariffs previously imposed under the International Emergency Economic Powers Act, there is additional uncertainty regarding the U.S. tariff regime, and the imposition by the U.S. government of new or different tariffs under different authority. For the retail products we source, directly or indirectly, outside of the U.S., including Mexico, Canada and China, major changes in tax or trade policies, tariffs or trade relations could significantly impact the cost of, demand for, and of retail product sales in our U.S. or other locations. Countries outside the U.S. may also change, and on occasion have changed, their business and trade policies in anticipation of or in response to increased import tariffs and other changes in U.S. trade policy and regulations, and consumers may seek to avoid goods not sourced domestically, all of which could significantly impact the cost of, demand for, and of retail products in our U.S., Mexico and Canada locations. In addition, our operations in international markets create risk due to foreign currency exchange rates and fluctuations in those rates, which may impact our sales and .
The inflation or deflation of commodity and other prices could affect our prices, demand for our products, our sales and our profit margins.
Prices of certain commodity products, including lumber and other raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, inflationary or deflationary pressures, labor costs, competition, market speculation, government regulations, tariffs and trade restrictions (including retaliatory tariffs), changes in trade and other policies of the U.S. and other countries, natural disasters, geopolitical tensions or conflicts, military conflicts or acts of war, and periodic delays in delivery. For example, in recent years, conflicts in Europe and the Middle East and the related international responses exacerbated inflationary pressures, including causing increases in commodity prices, fuel and other energy costs, and shipping costs. Rapid and significant changes in commodity and other prices, such as changes in lumber prices, and our ability to pass them on to our customers or manage them through our portfolio strategy, may be limited by the competitive environment in which we operate, and may affect the demand for our products, our sales and our profit margins. If we are to mitigate the impact of product cost inflation through vendor negotiations and other strategic initiatives, we may need to increase prices to a point which could impact consumer demand for our products.
We may incur property, casualty or other losses not covered by our insurance.
We are predominantly self-insured for a number of different risk categories, such as general liability (including product liability), property loss, workers’ compensation, employee group medical, employment practices liability and wage and hour claims, automobile claims, and cybersecurity and privacy liability, with third-party insurance coverage for certain catastrophic risks above the self-insurance levels. The types and amounts of insurance may vary from time to time based on our decisions with respect to risk retention and regulatory requirements. The incurrence of losses from significant claims, a substantial rise in costs to maintain our insurance, the failure to maintain adequate insurance coverage, or disputes with insurers regarding coverage could have an adverse impact on our financial condition and results of operations.
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Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition.
GAAP and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, such as asset impairment, inventories, lease obligations, self-insurance, vendor allowances, tax matters, business combinations, and litigation, are complex and involve many subjective assumptions, estimates and judgments. Implementation of new accounting standards or changes in existing accounting standards or their application or interpretation, or changes in underlying assumptions, estimates or judgments, could significantly change our reported or expected financial performance or financial condition. The implementation of, or changes to, accounting standards could also require certain systems, internal processes, internal controls, and other changes that could increase our operating costs.
We are involved from time to time in a number of legal, regulatory and governmental enforcement proceedings. While we cannot predict the outcomes of those proceedings and other contingencies with certainty, certain of them could adversely affect our operations and reputation and/or increase our costs.
We are involved in a number of legal proceedings and regulatory matters, including government inquiries and investigations, and consumer, employment, tort and other litigation that arise from time to time in the ordinary course of business. Litigation is inherently unpredictable, and the outcome of some of these proceedings and other contingencies could require us to take or refrain from taking actions, which could adversely affect our operations or could result in excessive adverse verdicts, fines, or results. Additionally, as we have seen in the past, involvement in such lawsuits, investigations and inquiries, and other proceedings, as well as compliance with any settlements or consent decrees that result from those proceedings, could involve significant expense, divert management’s attention and resources from other matters, and impact the brand and reputation of the Company.
Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
Risk Management and Strategy
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats. We have implemented cybersecurity processes, technologies, and controls to aid in our efforts to assess, identify, and manage such risks. Our cybersecurity program prioritizes threat mitigation, while focusing on maintaining the integrity and resilience of our systems. We leverage the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework as guidelines in the development of our cybersecurity program. We also adhere to applicable Payment Card Industry Data Security Standards. The cybersecurity risk management process and related governance processes are integrated into our broader enterprise risk management framework, which is designed to appropriately identify, prioritize, manage, and oversee risks. Cybersecurity risks are reviewed as part of our enterprise risk management processes, with findings integrated into our overall risk management strategy.
Overseeing our cybersecurity efforts on a day-to-day basis is our cybersecurity team, led by our Chief Information Security Officer (“CISO”). Our cybersecurity team, in partnership with third parties, designs and implements our data security and cybersecurity programs, risk assessments, monitoring procedures, and training programs for our associates. We continue to make investments to enhance our ability to identify, protect against, detect and respond to security risks within our environment.
Monitoring and Mitigation. We maintain a range of tools and services to aid in and inform our monitoring and mitigation of cyber risks. Throughout the year, internal teams conduct targeted audits and penetration tests. We engage third parties to independently evaluate our cybersecurity maturity on an annual basis and perform a risk assessment, as well as to provide expertise as needed on various cybersecurity programs and issues. We maintain a security operations center that is staffed around the clock to detect, mitigate, and respond to cyber threats. In the event we identify a cybersecurity incident, we have defined procedures to respond to and recover from the incident as quickly as possible. Our policies and procedures are reviewed periodically to ensure they remain aligned with current regulatory requirements and the current threat landscape. We also have established classification and retention policies focused on limiting the risk of unauthorized exposure of customer, associate, and business data. We maintain cybersecurity insurance to help provide protection against losses arising from significant security incidents.
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The Company has an Incident Response Team (“IRT”), a cross-functional group with the expertise, authority and resources to act quickly, efficiently and appropriately to investigate, coordinate the response to, remediate, and communicate regarding a cybersecurity incident. The IRT uses a detailed incident response plan that outlines and coordinates the actions we take to prepare for, detect, respond to and recover from cybersecurity incidents. In addition, our IRT engages in tabletop exercises at least annually to simulate a response to a cybersecurity incident and uses the findings to improve our processes, plans and technologies.
Training. We provide data security and privacy awareness training to all associates upon hire and on an annual basis, with additional customized, role-based training provided to targeted internal audiences. In addition, we conduct periodic awareness campaigns and regular phishing email simulation tests to reinforce our new-hire and annual training and promote ongoing awareness of risks.
Vendor Security. We have a vendor risk management program that works to classify service provider or business partner risk based on several factors, including but not limited to data type accessed and/or retained. Using a risk-based approach, we perform diligence and security risk assessments for certain vendors and service providers and include appropriate cybersecurity and data protection obligations in our contractual arrangements.
Cybersecurity Risks. We have in the past experienced, and may in the future experience, cybersecurity incidents; however, we have not experienced any cybersecurity incidents that we have determined to be material in the past fiscal year. We face risks from cybersecurity threats that, if realized, may materially affect our business strategy, results of operations or financial condition . We describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or, if realized, are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition, in Part I, Item 1A. “Risk Factors.”
Governance
Our efforts to create a secure digital environment start with the governance and oversight of our data security and privacy policies and strategy. At the Board level, cybersecurity is overseen by the Board and the Audit Committee , which has primary responsibility for overseeing data protection, cybersecurity and privacy matters. In fiscal 2025, our Board held a session dedicated to cybersecurity and business continuity. In addition, since the beginning of fiscal 2025, the Board and/or the Audit Committee have received reports on data protection, cybersecurity and/or privacy matters from senior information technology (“IT”) leaders, including our Chief Information Officer (“CIO”), CISO, Chief Privacy Officer, and the Chair of our Data Security and Privacy Governance Committee (discussed below). Periodically, our Board receives presentations on these matters from third-party experts.
Our CISO, who reports to our CIO, joined the Company in 2021 after working with the Company as a third-party consultant beginning in 2019. During a nearly two-decade tenure at a leading professional services firm, he worked with clients on managing information security, developing cybersecurity strategy, and implementing effective information and cybersecurity programs and initiatives addressing emerging cybersecurity threats. Our CISO has significant prior cybersecurity experience, including experience protecting company, customer and associate data across a diverse set of industries. He holds a Bachelor of Science degree in Information Systems and has achieved several relevant certifications, including Certified Information Security Manager, Certified Information Systems Security Professional, and Certified Information Privacy Professional. Our CISO leads a team of associates focused on cybersecurity.
We have three management-level committees that support our cybersecurity, privacy and data governance efforts. They are led by our Data Security and Privacy Governance Committee, which provides management-level governance over cybersecurity and privacy matters, including discussion of cybersecurity and privacy priorities, emerging risks, awareness and training programs, risk mitigation efforts, and regulatory compliance. This committee is chaired by our Vice President – Internal Audit and Corporate Compliance and is composed of a cross-functional team of senior leaders, including our CEO. The committee generally meets quarterly and is supported by our Security and Technology Risk Leadership Committee and our Privacy and Data Governance Committee. The activities of the Data Security and Privacy Governance Committee are reported to the Board or the Audit Committee by the Chair of the committee, as appropriate .
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The Security and Technology Risk Leadership Committee provides leadership and oversight of our cybersecurity program. It is chaired by our CISO and composed of Company technology leaders, as well as a cross-functional group of representatives from other departments. Our Privacy and Data Governance Committee provides leadership and oversight of our privacy and data governance programs. It is chaired by our Chief Privacy Officer and composed of a cross-functional group across approximately 20 departments. These committees generally meet monthly or every other month and report to the Data Security and Privacy Governance Committee on a regular basis.
Item 2. Properties.
The following table presents the percentage of our owned versus leased facilities in operation within our Primary segment at the end of fiscal 2025, along with the total square footage:
square footage in millions
Owned
Leased
Total Square Footage
Stores (1)
Distribution and fulfillment centers and warehouses (2)
Offices and other (3)
Total Primary segment
(1) Our owned stores include those subject to ground leases.
(2) We operated over 500 distribution and fulfillment centers and warehouses at the end of fiscal 2025.
(3) Our Store Support Center (corporate headquarters) is located in Atlanta, GA.
We also operated over 1,250 locations within our SRS non-reportable operating segments throughout the U.S. and Canada at the end of fiscal 2025, the majority of which are leased.
The following table presents our U.S. store locations (including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam) within our Primary segment at the end of fiscal 2025:
Stores
Stores
Stores
Alabama
Kentucky
Ohio
Alaska
Louisiana
Oklahoma
Arizona
Maine
Oregon
Arkansas
Maryland
Pennsylvania
California
Massachusetts
Puerto Rico
Colorado
Michigan
Rhode Island
Connecticut
Minnesota
South Carolina
Delaware
Mississippi
South Dakota
District of Columbia
Missouri
Tennessee
Florida
Montana
Texas
Georgia
Nebraska
Utah
Guam
Nevada
Vermont
Hawaii
New Hampshire
Virgin Islands
Idaho
New Jersey
Virginia
Illinois
New Mexico
Washington
Indiana
New York
West Virginia
Iowa
North Carolina
Wisconsin
Kansas
North Dakota
Wyoming
Total U.S.
Fiscal 2025 Form 10-K
Table of Contents
The following table presents our store locations outside of the U.S. within our Primary segment at the end of fiscal 2025:
Canada
Stores
Mexico
Stores
Mexico
Stores
Alberta
Aguascalientes
Nayarit
British Columbia
Baja California
Nuevo León
Manitoba
Baja California Sur
Oaxaca
New Brunswick
Campeche
Puebla
Newfoundland
Chiapas
Querétaro
Nova Scotia
Chihuahua
Quintana Roo
Ontario
Coahuila
San Luis Potosí
Prince Edward Island
Colima
Sinaloa
Quebec
Distrito Federal
Sonora
Saskatchewan
Durango
State of Mexico
Total Canada
Guanajuato
Tabasco
Guerrero
Tamaulipas
Hidalgo
Tlaxcala
Jalisco
Veracruz
Michoacán
Yucatán
Morelos
Zacatecas
Total Mexico
Item 3. Legal Proceedings.
The Company is party to various legal proceedings arising in the ordinary course of its business but is not currently a party to any legal proceeding that management believes will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental regulations if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold. Pursuant to SEC regulations, the Company uses a threshold of $1 million for purposes of determining whether disclosure of any such proceedings is required. Accordingly, below we have provided an update regarding the civil consent decree we entered into with the U.S. Department of Justice, the EPA, and the states of Utah, Massachusetts, and Rhode Island in April 2021.
As previously reported, the decree required certain changes to lead-safe work practices in our installation services business and provided for stipulated penalties for failure to perform by third-party installers. In the second quarter of fiscal 2025, we made the final payment of stipulated penalties owed under the decree, and in the fourth quarter of fiscal 2025 the decree was formally terminated. The aggregate amount of stipulated penalties paid to the EPA under the decree totaled approximately $1.7 million, and we have collected fines from our third-party installers for this amount.
Item 4. Mine Safety Disclosures.
Not applicable.
Fiscal 2025 Form 10-K
Table of Contents
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Since April 19, 1984, our common stock has been listed on the NYSE, trading under the symbol “HD.” We paid our first cash dividend on June 22, 1987 and have paid a cash dividend during each subsequent quarter. While we currently expect a cash dividend to be paid in the future, future dividend payments are subject to declaration by our Board based on our earnings, capital requirements, financial condition, and other factors considered relevant by our Board.
At March 4, 2026, there were a pproximately 97,000 holders of record of our common stock and approximately 6,159,000 addi tional “street name” holders whose shares are held of record by banks, brokers, and other financial institutions.
STOCK PERFORMANCE GRAPH
The graph and table below present our cumulative total shareholder returns relative to the performance of the S&P 500 Consumer Discretionary Distribution & Retail Index (the “S&P 500 Retail Index”) and the S&P 500 Index for the five most recent fiscal years. The graph assumes $100 was invested at the closing price of our common stock on the NYSE and in each index on the last trading day of the fiscal year ended January 31, 2021 and assumes that all dividends were reinvested on the date paid. The points on the graph represent fiscal year-end amounts based on the last trading day in each fiscal year.
Fiscal Year Ended
January 31,
January 30,
January 29,
January 28,
February 2,
February 1,
The Home Depot
S&P 500 Retail Index
S&P 500 Index
Fiscal 2025 Form 10-K
Table of Contents
ISSUER PURCHASES OF EQUITY SECURITIES
The following table presents the number and average price of shares purchased by the Company in each fiscal month of the fourth quarter of fiscal 2025:
Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Program (2)
Dollar Value of Shares that May Yet Be Purchased Under the Program (2)(3)
November 3, 2025 – November 30, 2025
December 1, 2025 – December 28, 2025
December 29, 2025 – February 1, 2026
(1) These amounts reflect deemed repurchases pursuant to our Omnibus Stock Incentive Plan, as Amended and Restated May 19, 2022 (the “Omnibus Plan”). Under the Omnibus Plan, participants surrender shares as payment of applicable tax withholding on the vesting of restricted stock. Participants in the Omnibus Plan may also exercise stock options by surrendering shares of common stock that the participants already own as payment of the exercise price. Shares so surrendered by participants in the Omnibus Plan are repurchased pursuant to the terms of the Omnibus Plan and applicable award agreement and not pursuant to publicly announced share repurchase programs.
(2) On August 14, 2023, our Board approved a $15.0 billion share repurchase authorization that replaced the previous authorization of $15.0 billion, which was approved on August 18, 2022. The August 2023 authorization does not have a prescribed expiration date. We paused share repurchases in March 2024 and have not resumed share repurchase activity as of February 1, 2026.
(3) Excludes excise taxes incurred on share repurchases.
SALES OF UNRE GISTERED SECURITIES
During the fourth quarter of fiscal 2025, we issued 545 deferred stock units under the Home Depot, Inc. Nonemployee Directors’ Deferred Stock Compensation Plan pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of the SEC’s Regulation D thereunder. The deferred stock units were credited during the fourth quarter of fiscal 2025 to the accounts of those non-employee directors who elected to receive all or a portion of Board retainers in the form of deferred stock units instead of cash. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in this plan.
During the fourth quarter of fiscal 2025, we credited 6,918 deferred stock units to participant accounts under the Restoration Plans pursuant to an exemption from the registration requirements of the Securities Act for involuntary, non-contributory plans. The deferred stock units convert to shares of common stock on a one-for-one basis following a termination of service as described in these plans.
Item 6. Reserved.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion provides an analysis of the Company’s financial condition and results of operations from management's perspective and should be read in conjunction with the consolidated financial statements and related notes included in this report. The discussion in this Form 10-K generally focuses on fiscal 2025 compared to fiscal 2024. A discussion of our results of operations and changes in financial condition for fiscal 2024 compared to fiscal 2023 has been omitted from this report, but can be found in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Form 10-K for fiscal 2024. For purposes of comparison, fiscal 2025 and fiscal 2023 include 52 weeks and fiscal 2024 includes 53 weeks.
TABLE OF CONTENTS
Executive Summary
Results of Operations
Liquidity and Capital Resources
Critical Accounting Estimates
Fiscal 2025 Form 10-K
Table of Contents
EXECUTIVE SUMMARY
We reported net sales of $164.7 billion in fiscal 2025. Net earnings were $14.2 billion, or $14.23 per diluted share.
During fiscal 2025, we generated $16.3 billion of cash flow from operations, received $4.1 billion of proceeds from commercial paper borrowings, net of repayments, and received $2.2 billion of proceeds from the issuance of long-term debt, net of discounts. This cash flow, together with cash on hand, was used to fund $9.2 billion in cash dividends, repay $5.0 billion of long-term debt, and fund $3.7 billion in capital expenditures. As described below, we also completed the GMS acquisition for aggregate cash consideration totaling approximately $5.5 billion , including the repayme nt of certain of GMS’s outstanding debt.
In February 2026, we announced a 1.3% increase in our quarterly cash dividend to $2.33 per share.
Our inventory turnover ratio was 4.4 times at the end of fiscal 2025, compared to 4.7 times at the end of fiscal 2024. The decrease in our inventory turnover ratio was primarily driven by higher average inventory levels during fiscal 2025.
Our ROIC was 25.7% for fiscal 2025 and 31.3% for fiscal 2024. The decrease in ROIC was primarily driven by higher average equity due to our ongoing pause in share repurchases and higher average long-term debt largely due to the financing of the SRS acquisition. See the Non-GAAP Financial Measures sec tion below for our definition and calculation of ROIC.
During fiscal 2025, we opened ten new stores in the U.S. and two new stores in Mexico, resulting in a total store count of 2,359 at February 1, 2026. A total of 324 of our stores, or 13.7%, were located in Canada and Mexico. At the end of fiscal 2025, we also operated over 1,250 locations within our SRS non-reportable operating segments throughout the U.S. and Canada.
GMS Acquisition
On June 29, 2025, we entered into a definitive agreement to acquire GMS, a leading distributor of specialty building products, including drywall, ceilings, steel framing and other complementary construction products, through branches located across the U.S. and Canada. Under the terms of the merger agreement, we, through a wholly owned subsidiary, made a cash tender offer to purchase all outstanding shares of GMS common stock for $110 per share. All conditions of the offer were satisfied, including receipt of the requisite regulatory approvals, and the merger was completed on September 4, 2025. As a result of the merger, GMS became a direct subsidiary of SRS and an indirect, wholly owned subsidiary of the Company. We believe the GMS acquisition will enhance SRS's position as a leading multi-category building materials distributor, bringing differentiated capabilities, product categories and customer relationships that are highly complementary to SRS's existing business. Refer to Note 13 to our consolidated financial statements for further discussion on the acquisition.
Tariffs and Other Trade Policy Matters
We continue to monitor developments with respect to tariffs and other trade policy matters closely, including impacts from the recent U.S. Supreme Court decision that struck down tariffs imposed under the International Emergency Economic Powers Act. We have worked, and continue to work, diligently to diversify our global supply chain and to implement other cost mitigation initiatives. While we experienced increased costs as a result of tariffs in fiscal 2025, our actions, including diversification efforts and some price increases, along with our scale, vendor relationships, experienced internal teams, and other initiatives allowed us to effectively mitigate the impact on our results of operations. We plan to continue to assess our sourcing and other mitigation strategies to maintain a strong value proposition for our customers and believe we remain well positioned to manage the impact that tariffs in effect as of the date of this filing are expected to have on our business.
As trade policy discussions are ongoing and related developments continue to evolve, we cannot predict with certainty their ultimate impact on our business in future periods, including our results of operations and cash flows. For more information on these risks and uncertainties see Part I, Item 1A. “Risk Facto r s . ”
Fiscal 2025 Form 10-K
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RESULTS OF OPERATIONS
The following table presents the percentage relationship between net sales and major categories in our consolidated statements of earnings:
Fiscal
Fiscal
Fiscal
dollars in millions
% of Net Sales
% of Net Sales
% of Net Sales
Net sales
Gross profit
Operating expenses:
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Interest and other (income) expense:
Interest income and other, net
Interest expense
Interest and other, net
Earnings before provision for income taxes
Provision for income taxes
Net earnings
Note: Fiscal 2025 and fiscal 2023 include 52 weeks. Fiscal 2024 includes 53 weeks. Certain percentages may not sum to totals due to rounding.
% Change
Selected financial and sales data:
Fiscal
Fiscal
Fiscal
Fiscal
Fiscal
Comparable sales (% change) (1)
Comparable customer transactions (% change) (1) (2)
Comparable average ticket (% change) (1) (2) (3)
Customer transactions (in millions) (2)
Average ticket (2) (3)
Diluted earnings per share (4)
(1) Does not include results from the 53 rd week of fiscal 2024.
(2) Customer transactions and average ticket measures do not include results from HD Supply or SRS (including GMS).
(3) Average ticket represents the average price paid per transaction and is used by management to monitor the performance of the Company, as it represents a primary driver in measuring sales performance.
(4) The 53rd week of fiscal 2024 increased diluted earnings per share in fiscal 2024 by approximately $0.30.
FISCAL 2025 COMPARED TO FISCAL 2024
Sales
We assess our sales performance by evaluating both net sales and comparable sales. Fiscal 2025 consisted of 52 weeks compared to 53 weeks in fiscal 2024. For purposes of the following discussion, comparable sales, comparable customer transactions, and comparable average ticket are based upon the comparable 52-week period from fiscal 2024.
Net Sales. Net sales for fiscal 2025 increased $5.2 billion, or 3.2%, to $164.7 billion. The increase in n et s ales for fiscal 2025 was primarily driven by SRS, which was acquired on June 18, 2024, and GMS, which was acquired on September 4, 2025. In aggregate, these acquisitions contributed approximately $6.3 billion of incremental net sales during fiscal 2025. Net sales also increased due to sales from new stores and the impact of a positive comparable sales environment. These increases were partially offset by the additional week in fiscal 2024 which contributed approximately $2.5 billion in net sales in fiscal 2024.
Fiscal 2025 Form 10-K
Table of Contents
Online sales represented 15.9% of net sales during fiscal 2025 and increased by 8.7% compared to fiscal 2024. Calculated on a comparable week basis relative to fiscal 2024, online sales increased by 10.4%. Online sales consist of sales of products generated through websites and mobile applications and does not include results from HD Supply or SRS (including GMS).
A stronger U.S. dollar compared to fiscal 2024 negatively impacted net sales by $307 million in fiscal 2025.
Comparable Sales. Comparable sales is a measure that highlights the performance of our existing locations and websites by measuring the change in net sales for a period over the comparable prior period of equivalent length. Comparable sales includes sales at locations, physical and online, open greater than 52 weeks (including remodels and relocations) and excludes closed stores. Acquisitions are typically included in comparable sales after they have been owned for more than 52 weeks. For our calculation of comparable sales in fiscal 2025, we compare weeks 1 through 52 in fiscal 2025 against weeks 2 through 53 in fiscal 2024. Comparable sales is intended only as supplemental information and is not a substitute for net sales presented in accordance with GAAP. The method of calculating comparable sales varies across the retail industry. As a result, our method of calculating comparable sales may not be the same as similarly titled measures reported by other companies.
Total comparable sales increased 0.3% in fiscal 2025, primarily reflecting a 1.4% increase in comparable average ticket, partially offset by a 1.0% decrease in comparable customer transactions compared to fiscal 2024. Our comparable sales results reflect customer engagement with smaller home improvement projects, which was offset by the impact of continued macroeconomic uncertainties and other macroeconomic factors, including a persisting high interest rate environment, that continue to pressure broader home improvement demand.
For fiscal 2025 , our Storage & Organization, Electrical, Bath, Plumbing, Indoor Garden, Outdoor Garden, Kitchen & Blinds, Hardware, Power, Building Materials, and Appliances merchandising departments within our Primary segment posted positive comparable sales compared to fiscal 2024. Our other merchandising departments within our Primary segment posted negative comparable sales during fiscal 2025 compared to fiscal 2024.
Gross Profit
Gross profit increased $1.6 billion, or 2.9%, to $54.9 billion in fiscal 2025. Gross profit as a percent of net sales, or gross profit margin, was 33.3% in fiscal 2025 compared to 33.4% in fiscal 2024. The decrease in gross profit margin reflects the inclusion of SRS and GMS in our consolidated results, partially offset by lower shrink and certain supply chain benefits within our Primary segment.
Operating Expenses
Our operating expenses are composed of SG&A and depreciation and amortization.
Selling, General & Administrative. SG&A increased $2.0 billion, or 6.8%, to $30.7 billion in fiscal 2025. As a percent of net sales, SG&A was 18.6% in fiscal 2025 compared to 18.0% in fiscal 2024, which primarily reflects higher payroll and related costs in fiscal 2025 along with the impact of a non-recurring legal-related benefit recognized during fiscal 2024 within our Primary segment.
Depreciation and Amortization. Depreciation and amortization increased $239 million, or 7.9%, to $3.3 billion in fiscal 2025. As a percent of net sales, depreciation and amortization was 2.0% in fiscal 2025 compared to 1.9% in fiscal 2024 , which primarily reflects increased intangible asset amortization expense resulting from our acquisitions of SRS and GMS.
Interest and Other, net
Interest and other, net increased $168 million, or 7.9%, to $2.3 billion in fiscal 2025. As a percentage of net sales, interest and other, net, was 1.4% in fiscal 2025 compared to 1.3% in fiscal 2024, primarily due to higher average long-term debt balances and lower interest income in fiscal 2025.
Provision for Income Taxes
Our combined effective income tax rate was 23.9% in fiscal 2025 compared to 23.7% in fiscal 2024.
Diluted Earnings per Share
Diluted earnings per share were $14.23 in fiscal 2025 compared to $14.91 in fiscal 2024. The decrease in diluted earnings per share for fiscal 2025 was primarily driven by lower net earnings during fiscal 2025. The 53rd week of fiscal 2024 increased diluted earnings per share in fiscal 2024 by approximately $0.30.
Fiscal 2025 Form 10-K
Table of Contents
NON-GAAP FINANCIAL MEASURES
To provide clarity on our operating performance, we supplement our reporting with certain non-GAAP financial measures. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. Non-GAAP financial measures presented herein may differ from similar measures used by other companies.
Return on Invested Capital
We believe ROIC is meaningful for management, investors and ratings agencies because it measures how effectively we deploy our capital base. ROIC is a non-GAAP profitability measure, not a measure of financial performance under GAAP. We define ROIC as NOPAT, a non-GAAP financial measure, for the most recent twelve-month period, divided by average debt and equity. We define average debt and equity as the average of beginning and ending long-term debt (including current installments) and equity for the most recent twelve-month period.
The following table presents the calculation of ROIC, together with a reconciliation of NOPAT to net earnings (the most comparable GAAP financial measure):
Fiscal
Fiscal
Fiscal
dollars in millions
Net earnings
Interest and other, net
Provision for income taxes
Operating income
Income tax adjustment (1)
NOPAT
Average debt and equity
ROIC
Note: Fiscal 2025 and fiscal 2023 include 52 weeks. Fiscal 2024 includes 53 weeks. Consistent with our consolidated financial statements, periods presented only include operating results for acquisitions since their respective acquisition dates.
(1) Income tax adjustment is defined as operating income multiplied by our effective tax rate for the trailing twelve months.
LIQUIDITY AND CAPITAL RESOURCES
At February 1, 2026, we had $1.4 billion in cash and cash equivalents, of which $1.0 billion was held by our foreign subsidiaries. We believe that our current cash position, cash flow generated from operations, funds available from our commercial paper program, and access to the long-term debt capital markets should be sufficient not only for our operating requirements, any required debt payments, and satisfaction of other contractual obligations, but also to enable us to invest in the business, fund dividend payments, and fund any share repurchases through the next several fiscal years. In addition, we believe we have the ability to obtain alternative sources of financing, if necessary or appropriate.
Our material cash requirements include contractual and other obligations arising in the normal course of business. Our contractual obligations include long-term debt and related interest payments, operating and finance lease obligations, and purchase obligations. In addition to our cash requirements, we follow a disciplined approach to capital allocation. This approach first prioritizes investing in the business, followed by paying dividends, with the intent of then returning excess cash to shareholders in the form of share repurchases. In March 2024, we paused share repurchases in connection with the SRS acquisition and do not have plans to resume share repurchases in fiscal 2026 as we seek to reduce our outstanding debt.
On July 4, 2025, the legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”) was signed into law in the U.S., which contains a broad range of tax provisions, including the allowance to expense 100% of the cost of qualified property and immediate expensing of domestic research and experimental expenditures. The above mentioned provisions resulted in a reduction in our fiscal 2025 cash tax payments.
Fiscal 2025 Form 10-K
Table of Contents
During fiscal 2025, we invested approximately $3.7 billion back into our business in the form of capital expenditures. We plan to invest approximately $4 billion back into our business in the form of capital expenditures in fiscal 2026, in line with our expectation of approximately 2.5% of projected fiscal 2026 net sales. We expect to make these investments across initiatives supporting our strategy of driving our core and culture, including building new stores and maintaining existing stores, delivering a frictionless, interconnected experience, and winning with Pros. However, as in the past, we may adjust our capital expenditures to support the operations of the business, to enhance long-term strategic positioning, or in response to the economic environment, as necessary or appropriate. We may also utilize strategic acquisitions to help accelerate our strategic initiatives.
During fiscal 2025, we paid cash dividends of $9.2 billion to shareholders. In February 2026, we announced a 1.3% increase in our quarterly cash dividend from $2.30 to $2.33 per share. We intend to pay a dividend in the future; however, any future dividend is subject to declaration by our Board based on our earnings, capital requirements, financial condition, and other factors considered relevant by our Board.
In August 2023, our Board approved a $15.0 billion share repurchase authorization that replaced the previous authorization of $15.0 billion, which was approved in August 2022. The August 2023 authorization does not have a prescribed expiration date. As of February 1, 2026, approximately $11.7 billion of the $15.0 billion share repurchase authorization remained available.
DEBT
At the beginning of fiscal 2025, we had a commercial paper program that allowed for an aggregate of $7.0 billion in borrowings, and was supported by $7.0 billion of back-up credit facilities. These back-up credit facilities consisted of a five-year $3.5 billion credit facility scheduled to expire in July 2027, a 364-day $2.0 billion credit facility scheduled to expire in May 2025, and a 364-day $1.5 billion credit facility scheduled to expire in July 2025.
In May 2025, we terminated all three back-up credit facility agreements and simultaneously entered into a new five-year $3.5 billion credit facility scheduled to expire in May 2030 and a new 364-day $3.5 billion credit facility scheduled to expire in May 2026.
In July 2025, we increased our commercial paper program by $4.0 billion in connection with the anticipated financing of the GMS acquisition (see Note 13 to our consolidated financial statements). In July 2025, in connection with the increase in the commercial paper program, we also entered into a new three-year $3.0 billion back-up credit facility scheduled to expire in July 2028, and a new 364-day $1.0 billion back-up credit facility scheduled to expire in July 2026, as well as amended and restated our existing 364-day $3.5 billion credit facility to extend the maturity from May 2026 to July 2026. In the aggregate, as of February 1, 2026, our commercial paper program allows for borrowings up to $11.0 billion and is supported by $11.0 billion of back-up credit facilities.
On September 4, 2025, we utilized approximately $2.0 billion of commercial paper borrowings, together with cash on hand, to fund the GMS acquisition. These borrowings were subsequently repaid with the $2.0 billion of proceeds from our September 2025 senior notes issuance. We also utilized commercial paper borrowings in fiscal 2025 to support general liquidity, including the repayment of senior note maturities.
During fiscal 2025, all of our short-term borrowings were under our commercial paper program, and the maximum amount outstanding during that period was $5.8 billion. At February 1, 2026, we had outstanding borrowings under our commercial paper program of $4.5 billion with a weighted average interest rate of 3.7%. At February 1, 2026, we had no outstanding borrowings under our back-up credit facilities, and we were in compliance with all of the covenants contained in our back-up credit facilities, none of which are expected to impact our liquidity or capital resources.
We also issue senior notes from time to time. As discussed above, in September 2025, we issued $2.0 billion of senior notes, which were used to repay commercial paper borrowings used to fund the GMS acquisition. Separately, during fiscal 2025, we repaid an aggregate of $4.25 billion of senior notes at maturity.
At February 1, 2026, we had an aggregate principal amount of senior notes outstanding of $48.8 billion, with $4.6 billion payable within 12 months. Future interest payments associated with these senior notes total $25.4 billion, with $2.0 billion payable within 12 months, based on current interest rates, which include the impact of our active interest rate swap agreements.
The indentures governing our senior notes do not generally limit our ability to incur additional indebtedness or require us to maintain financial ratios or specified levels of net worth or liquidity. The indentures governing our notes contain various covenants, none of which are expected to impact our liquidity or capital resources. We were in compliance with all such covenants at February 1, 2026. See Note 5 to our consolidated financial statements for further discussion of our debt arrangements.
Fiscal 2025 Form 10-K
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LEASES
We use operating and finance leases largely to obtain a portion of our real estate, including our stores, distribution centers, branches, and support centers. At February 1, 2026, we had aggregate remaining lease payment obligations of $15.9 billion, with $2.2 billion payable within 12 months. Aggregate lease obligations include approximately $675 million of obligations related to leases not yet commenced. See Note 3 to our consolidated financial statements for further discussion of our operating and finance leases.
PURCHASE OBLIGATIONS AND OTHER
Purchase obligations include all legally binding contracts such as firm commitments for inventory purchases, media and sponsorship spend, software and license commitments, and legally binding service contracts. We issue inventory purchase orders in the ordinary course of business, which are typically cancellable by their terms, therefore we do not consider purchase orders that are cancellable to be firm inventory commitments. At February 1, 2026, we had aggregate purchase obligations of $1.9 billion , with $1.2 billion paya ble within 12 months.
At February 1, 2026, we had aggregate liabilities for unrecognized tax benefits totaling $559 million, nearly all of which are recorded as non-current liabilities. The timing of payment, if any, associated with our long-term unrecognized tax benefit liabilities is unknown. See Note 6 to our consolidated financial statements for further discussion of our unrecognized tax benefits.
We have no material off-balance sheet arrangements.
CASH FLOWS SUMMARY
Operating Activities
Cash flow generated from operations provides us with a significant source of liquidity. Our operating cash flows result primarily from cash received from our customers, offset by cash payments we make for products and services, associate compensation, operations, occupancy costs, and income taxes. Cash provided by or used in operating activities is also subject to changes in working capital. Working capital at any point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.
Net cash provided by operating activities decreased by $3.5 billion in fiscal 2025 compared to fiscal 2024, primarily due to changes in working capital. Changes in working capital were primarily driven by the timing of vendor payments and increased inventories during fiscal 2025, along with the deferral of our fourth quarter fiscal 2024 estimated federal tax payment to the first quarter of fiscal 2025, resulting in fewer estimated tax payments in fiscal 2024 compared to fiscal 2025. This was partially offset by a reduction to our fiscal 2025 cash tax payments resulting from the OBBBA.
Fiscal 2025 Form 10-K
Table of Contents
Investing Activities
Net cash used in investing activities decreased by $12.1 billion in fiscal 2025 compared to fiscal 2024, primarily resulting from higher cash paid for acquisitions during fiscal 2024 compared to fiscal 2025.
Financing Activities
Net cash used in financing activities in fiscal 2025 primarily reflected $9.2 billion of cash dividends paid and $5.0 billion of repayments of long-term debt, partially offset by $4.1 billion of proceeds from commercial paper borrowings, net of repayments, and $2.2 billion of net proceeds from long-term debt.
Net cash used in financing activities in fiscal 2024 primarily reflected $8.9 billion of cash dividends paid, $1.5 billion of repayments of long-term debt, and $649 million of share repurchases prior to pausing share repurchases in March 2024, largely offset by approximately $10.0 billion of net proceeds from long-term debt, which were used to finance the SRS acquisition, and $316 million of proceeds from commercial paper borrowings, net of repayments.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates.
Our significant accounting policies are disclosed in Note 1 to our consolidated financial statements. The following discussion addresses our most critical accounting estimates, which are those that are both important for the representation of our financial condition and results of operations, and that require significant judgment or use of significant assumptions or complex estimates.
BUSINESS COMBINATIONS
We account for business combinations using the acquisition method of accounting, which requires that once control is obtained, all the assets acquired and liabilities assumed are recorded at their respective fair values at the date of acquisition. The determination of the acquisition date fair values of identifiable assets acquired and liabilities assumed requires estimates and the use of valuation techniques when fair value is not readily available and requires a significant amount of management judgment. For the valuation of intangible assets acquired in a business combination, we typically use an income approach. Specifically, we utilize the multi-period excess earnings method to determine the estimated acquisition date fair values of the customer relationships intangible assets. The significant assumptions used to estimate the fair values of customer relationships included forecasted revenues, expected customer attrition rates, and the discount rate applied. Although the Company believes its estimates of acquisition date fair values are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on the determination of the fair values of the customer relationships intangible assets acquired.
The excess of the purchase price over fair values of identifiable assets acquired and liabilities assumed is recorded as goodwill. During the measurement period, which is up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill due to the use of preliminary information in our initial estimates. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.
MERCHANDISE INVENTORIES
We value the majority of our inventory under the retail inventory method, with the remainder of our inventories valued under a cost method, primarily th e moving average cost and first-in, first-out methods. Under the retail inventory method, inventories are stated at cost, which is determined by applying a cost-to-retail ratio to the retail value of inventories.
The retail value of our inventory is adjusted as needed to reflect current market conditions. Because these adjustments are based on current prevailing market conditions, the value of our inventory approximates the lower of cost or market. The valuation under the retail inventory method is based on a number of factors such as markups, markdowns, and inventory losses (or shrink). As such, there exists an inherent uncertainty in the final determination of inventory cost and gross profit. We determine markups and markdowns based on the consideration of a variety of factors such as current and anticipated demand, customer preferences and buying trends, age of the merchandise, and weather conditions.
Fiscal 2025 Form 10-K
Table of Contents
We calculate shrink based on actual inventory losses identified as a result of physical inventory counts during each fiscal period and estimated inventory losses occurring between physical inventory counts. The estimate for shrink occurring in the interim period between physical inventory counts is calculated on a store-specific basis and is primarily based on recent shrink results. A 10% increase in the shrink rate used to estimate our inventory shrink reserve would have increased cost of sales by approximately $79 million for fiscal 2025. Historically, the difference between estimated shrink and actual inventory losses has not been material to our annual financial results.
We do not believe there is a reasonable likelihood of a material change in the estimates or assumptions we use to value our inventory under the retail inventory method. We believe that the retail inventory method provides an inventory valuation which approximates cost and results in valuing our inventory at the lower of cost or market.
ADDITIONAL INFORMATION
For information on our accounting policies and on accounting pronouncements that have impacted or may materially impact our financial condition, results of operations, or cash flows, see Note 1 to our consolidated financial statements.
