✦ The Market Recovery CaseNarrow moat

Home Depot (HD) — the future bets

Home Depot has told investors what happens when housing recovers, and its results are running at less than half of that case.

Home Depot has published what it expects when the housing market recovers. Its Market Recovery Case calls for total sales growth of approximately 5% to 6%, total comparable sales growth of approximately 4% to 5%, operating profit growing faster than sales and diluted earnings per share growth in the mid-to-high single digits1.

Comparable sales (%)0.3%FY2025 actual1.7%Q2 FY2026 actual2.0%FY2026 guide high4%Recovery case low5%Recovery case highHome Depot results releases; December 2025 investor conference
Half way to the recovery case.

The trigger is specific. The chief financial officer said the case reflects performance expectations once we see momentum in housing activity and increased spend on larger projects driven by "pent-up demand"2.

The present is well below it. Fiscal 2026 guidance is comparable sales of approximately flat to 2.0%3, and the company's own view of the market is -1% to +1%4. Comparable sales were 1.7% in the second quarter5.

The bet is sound in logic. A generation of homeowners locked into low mortgage rates is putting off moves and projects; when rates fall or incomes catch up, the backlog of work is real. What is uncertain is the timing.

The recovery case also promises operating profit growth faster than sales6, the reverse of the last three years. If it arrives, the fixed costs that pushed margins down on the way in would push them up on the way out. That leverage is why the stores' earnings are more sensitive to housing than their sales.

This bet is narrow and widening as the backlog grows. Quarterly comparable sales are the proof: two consecutive quarters above 3% would mean the recovery case has started.

Moat trajectory: Widening

Comps 1.7% in Q2 fiscal 2026 against a 4-5% recovery case.

The number that tests this moat
Reported
Fiscal 2026 comparable sales guidance
Flat to +2.0% (reaffirmed 18 August 2026)

Guidance against the 4-5% recovery case; two quarters above 3% would mean the recovery has begun.

Source: Home Depot Q2 fiscal 2026 results release ↗
References
  1. ReportedIts Market Recovery Case calls for total sales growth of approximately 5% to 6%, total comparable sales growth of approximately 4% to 5%, operating profit growing faster than sales and diluted earnings per share growth in the mid-to-high single digits.
    The Home Depot Investor and Analyst Conference release: preliminary fiscal 2026 outlook, a home improvement market of -1% to +1%, an approximately $1.1 trillion addressable market and the Market Recovery Case. — December 2025 · publ. 9 December 2025 · source ↗
  2. ReportedThe chief financial officer said the case reflects performance expectations once we see momentum in housing activity and increased spend on larger projects driven by "pent-up demand".
    The Home Depot Investor and Analyst Conference release: preliminary fiscal 2026 outlook, a home improvement market of -1% to +1%, an approximately $1.1 trillion addressable market and the Market Recovery Case. — December 2025 · publ. 9 December 2025 · source ↗
  3. ReportedFiscal 2026 guidance is comparable sales of approximately flat to 2.0%, and the company's own view of the market is -1% to +1%.
    The Home Depot fourth-quarter and fiscal 2025 results release, Form 8-K exhibit 99.1 - fiscal 2026 guidance, the dividend raised to $2.33 a quarter, adjusted EPS of $14.69. — Fiscal 2025 · publ. 24 February 2026 · source ↗
  4. ReportedFiscal 2026 guidance is comparable sales of approximately flat to 2.0%, and the company's own view of the market is -1% to +1%.
    The Home Depot Investor and Analyst Conference release: preliminary fiscal 2026 outlook, a home improvement market of -1% to +1%, an approximately $1.1 trillion addressable market and the Market Recovery Case. — December 2025 · publ. 9 December 2025 · source ↗
  5. ReportedComparable sales were 1.7% in the second quarter.
    The Home Depot second-quarter fiscal 2026 results release, Form 8-K exhibit 99.1 - sales, comparable sales, transactions, ticket, earnings, reaffirmed guidance and the balance sheet. — Q2 fiscal 2026 · publ. 18 August 2026 · source ↗
  6. ReportedThe recovery case also promises operating profit growth faster than sales, the reverse of the last three years.
    The Home Depot Investor and Analyst Conference release: preliminary fiscal 2026 outlook, a home improvement market of -1% to +1%, an approximately $1.1 trillion addressable market and the Market Recovery Case. — December 2025 · publ. 9 December 2025 · source ↗
Sources
Generated September 26, 2026