Six Things Larger Pros ExpectNarrow moat

Home Depot (HD) — moat facet

Home Depot admits it has not typically offered six things larger Pros expect, and is now building a supply house inside a retailer.

Home Depot's letter to shareholders is unusually candid about what it lacked. It says there are six capabilities larger Pros expect that it has not typically offered in the past: "a professional sales force, enhanced delivery capabilities, trade credit, preferred pricing programs, order management, and a best-in-class digital experience"1. Today it has many of them in some top Pro markets, at different stages of maturity2.

Six capabilities larger Pros expectProfessional sales forcebeing addedEnhanced deliveryover half same or next dayTrade creditreceivables +14.2% in FY2025Preferred pricingbeing addedOrder managementbeing addedDigital experienceonline 16.6% of Q2 FY2026 salesHome Depot fiscal 2025 annual report; Form 10-K and Q2 fiscal 2026 10-Q
Capabilities a supply house takes for granted.

That is a description of a lumber yard or supply house, not a big-box store. The medium to large Pro who works on complex projects buys on account, wants a named salesperson and delivery to the site, and buys the same materials week after week. Home Depot's stores were built for the Pro who stops in for fill-in purchases; the new capabilities aim at the Pro who plans a job.

The company has been adding them piece by piece. It offers a Pro Xtra loyalty programme and a Pro Trade Credit programme3, and says it is investing in fulfillment options, preferred pricing and technology tools for order and project management4. Its AI-powered Blueprint Takeoffs Tool and Material List Builder are aimed at the same customer5.

The prize is large, and so is the competition: the 10-K lists electrical, plumbing and building materials supply houses and lumber yards among its rivals6.

The annual report explains why the big Pro matters. It describes a significant opportunity with the medium to large Pro that shops across categories and works on complex projects, and says Home Depot can simplify their experience by reducing the number of suppliers they need to transact with7. As Pros use more of the capabilities, the company sees increased engagement and incremental spend8.

Home Depot says the capabilities are in different stages of maturity in its top Pro markets9, and that as Pros use them it sees increased engagement and incremental spend10. The company gives no figure for that spend, so the only measure outside it is the Pro share of revenue that press coverage reports11.

This is a narrow advantage under construction. The figure that shows progress is the Pro share of revenue, which press coverage of the fiscal 2025 results put at nearly half12; Home Depot does not disclose it in the 10-K. Receivables, which rise as Pros buy on credit, grew 14.2% in fiscal 202513.

Moat trajectory: Widening

Capabilities rolling out market by market; receivables up 14.2%.

The number that tests this moat
Reported
Receivables, net, latest year end
$5,597M (1 February 2026) against $4,903M a year earlier

Credit extended to Pros; growth far above sales growth means the Pro strategy is being financed on Home Depot's balance sheet.

Source: Home Depot Form 10-K, fiscal 2025 ↗
⚠ Threats to the moat
⚠ THREAT 01
Trade Credit Means Credit Risk
Home Depot's receivables grew 14.2% in a year its sales grew 3.2%, as it lends to contractors whose ability to pay depends on construction.
References
  1. ReportedIt says there are six capabilities larger Pros expect that it has not typically offered in the past: "a professional sales force, enhanced delivery capabilities, trade credit, preferred pricing programs, order management, and a best-in-class digital experience".
    The Home Depot fiscal 2025 annual report to shareholders - the letter's Pro strategy, the six capabilities larger Pros expect, and same-day or next-day delivery. — Fiscal 2025 · publ. April 2026 · source ↗
  2. ReportedToday it has many of them in some top Pro markets, at different stages of maturity.
    The Home Depot fiscal 2025 annual report to shareholders - the letter's Pro strategy, the six capabilities larger Pros expect, and same-day or next-day delivery. — Fiscal 2025 · publ. April 2026 · source ↗
  3. ReportedIt offers a Pro Xtra loyalty programme and a Pro Trade Credit programme, and says it is investing in fulfillment options, preferred pricing and technology tools for order and project management.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1 business and Item 2 properties: stores, real estate, supply chain and workforce. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  4. ReportedIt offers a Pro Xtra loyalty programme and a Pro Trade Credit programme, and says it is investing in fulfillment options, preferred pricing and technology tools for order and project management.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1 business and Item 2 properties: stores, real estate, supply chain and workforce. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  5. ReportedIts AI-powered Blueprint Takeoffs Tool and Material List Builder are aimed at the same customer.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1 business and Item 2 properties: stores, Pros, SRS, competition and supply chain. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  6. ReportedThe prize is large, and so is the competition: the 10-K lists electrical, plumbing and building materials supply houses and lumber yards among its rivals.
    The Home Depot Form 10-K for fiscal 2025 (the 52 weeks ended 1 February 2026) - Item 1 business: competition, online and the interconnected experience. — Fiscal 2025 · publ. 18 March 2026 · source ↗
  7. ReportedIt describes a significant opportunity with the medium to large Pro that shops across categories and works on complex projects, and says Home Depot can simplify their experience by reducing the number of suppliers they need to transact with.
    The Home Depot fiscal 2025 annual report to shareholders - the letter's Pro strategy, the six capabilities larger Pros expect, and same-day or next-day delivery. — Fiscal 2025 · publ. April 2026 · source ↗
  8. ReportedAs Pros use more of the capabilities, the company sees increased engagement and incremental spend.
    The Home Depot fiscal 2025 annual report to shareholders - the letter's Pro strategy, the six capabilities larger Pros expect, and same-day or next-day delivery. — Fiscal 2025 · publ. April 2026 · source ↗
  9. ReportedHome Depot says the capabilities are in different stages of maturity in its top Pro markets, and that as Pros use them it sees increased engagement and incremental spend.
    The Home Depot fiscal 2025 annual report to shareholders - the letter's Pro strategy, the six capabilities larger Pros expect, and same-day or next-day delivery. — Fiscal 2025 · publ. April 2026 · source ↗
  10. ReportedHome Depot says the capabilities are in different stages of maturity in its top Pro markets, and that as Pros use them it sees increased engagement and incremental spend.
    The Home Depot fiscal 2025 annual report to shareholders - the letter's Pro strategy, the six capabilities larger Pros expect, and same-day or next-day delivery. — Fiscal 2025 · publ. April 2026 · source ↗
  11. ReportedThe company gives no figure for that spend, so the only measure outside it is the Pro share of revenue that press coverage reports.
    PYMNTS on Home Depot's fiscal 2025 results: the Pro business nears half of revenue. — Fiscal 2025 · publ. 24 February 2026 · source ↗
  12. ReportedThe figure that shows progress is the Pro share of revenue, which press coverage of the fiscal 2025 results put at nearly half; Home Depot does not disclose it in the 10-K. Receivables, which rise as Pros buy on credit, grew 14.2% in fiscal 2025.
    PYMNTS on Home Depot's fiscal 2025 results: the Pro business nears half of revenue. — Fiscal 2025 · publ. 24 February 2026 · source ↗
  13. Moat Explorer calcThe figure that shows progress is the Pro share of revenue, which press coverage of the fiscal 2025 results put at nearly half; Home Depot does not disclose it in the 10-K. Receivables, which rise as Pros buy on credit, grew 14.2% in fiscal 2025.
    Moat Explorer calculation from The Home Depot's filings and market data ($ millions unless stated; fiscal years as Home Depot names them, fiscal 2025 = year to 1 February 2026). Segments: Primary net sales 151,966 / 152,669 - 1 = -0.5% (fiscal 2023 to 2025); Primary operating income 20,574 / 21,689 - 1 = -5.1%; Primary operating margin 21,689 / 152,669 = 14.2% (fiscal 2023), 21,313 / 153,108 = 13.9% (fiscal 2024), 20,574 / 151,966 = 13.5% (fiscal 2025); Other operating margin 213 / 6,406 = 3.3% (fiscal 2024), 316 / 12,717 = 2.5% (fiscal 2025); Other before intangible amortisation 316 + 398 = 714, 714 / 12,717 = 5.6%; Other share of net sales 12,717 / 164,683 = 7.7%; Other share of operating income 316 / 20,890 = 1.5%. Q2 fiscal 2026: Primary 42,806 / 42,157 - 1 = +1.5%, margin 6,592 / 42,806 = 15.4%; Other 5,055 / 3,120 - 1 = +62%, margin 247 / 5,055 = 4.9%; Q2 fiscal 2025 margins: Primary 6,354 / 42,157 = 15.1%, Other 201 / 3,120 = 6.4%; Q1 fiscal 2026 Primary 80,569 - 42,806 = 37,763 and 11,557 - 6,592 = 4,965, margin 13.1%; Other 9,057 - 5,055 = 4,002 and 263 - 247 = 16, margin 0.4%. Pro acquisitions 8,692 + 18,028 + 5,081 + about 1,100 = about 32,900 (HD Supply, SRS, GMS, Mingledorff's). Growth: net sales 164,683 - 159,514 = 5,169 in fiscal 2025 against about 6,300 contributed by acquisitions; fiscal 2025 over fiscal 2023 164,683 - 152,669 = 12,014, of which Other 12,717. Net sales fiscal 2017 to fiscal 2025 164,683 / 100,904 - 1 = +63%; stores 2,359 - 2,284 = 75, 75 / 2,284 = +3.3%. Traffic: transactions 1,601.5 / 1,500.8 - 1 = +6.7% (fiscal 2015 to 2025); 1,601.5 / 1,759.7 - 1 = -9.0% (fiscal 2021 to 2025); average ticket 90.56 / 58.77 - 1 = +54%. Net sales per store 164,683 / 2,359 is not meaningful because Other has no stores; Primary 151,966 / 2,359 = 64.4 per store. Margins: operating margin 21,689 / 152,669 = 14.2%, 21,526 / 159,514 = 13.5%, 20,890 / 164,683 = 12.7%; SG&A 30,702 / 28,748 - 1 = +6.8% against net sales +3.2%; Primary SG&A 28,885 / 27,822 - 1 = +3.8% against Primary net sales 151,966 / 153,108 - 1 = -0.7%; interest expense 2,412 / 1,943 - 1 = +24%; operating income / interest 20,890 / 2,412 = 8.7 times. Departments: Lighting 4,006 / 4,549 - 1 = -11.9%; Flooring 8,232 / 8,703 - 1 = -5.4%; Storage and Organization 5,054 / 4,881 - 1 = +3.5%; Appliances 13,987 / 164,683 = 8.5%. Classes fiscal 2025: 52,439 + 51,679 + 47,848 = 151,966 = Primary net sales. Net margin 14,156 / 164,683 = 8.6%; Lowe's 6.63 / 90.43 = 7.3%; Lowe's price to sales 106.20 / 90.43 = 1.17 against 1.73; Primary share 151,966 / 164,683 = 92.3%; cost of sales 164,683 - 54,865 = 109,818. Primary share Q2 fiscal 2026 42,806 / 47,861 = 89.4%; H1 net sales increase 89.6 - 85.1 = 4.5bn, GMS 2.8 / 4.5 = 62%; average ticket 89.31 / 90.36 - 1 = -1.2%; equity build 14,156 - 9,152 = 5,004; buyback authorization 11.66 / 292.52 = 4.0% of market value; depreciation and amortisation as a share of sales, Other 715 / 12,717 = 5.6%, Primary 3,344 / 151,966 = 2.2%. US share 152,170 / 164,683 = 92.4%. Mexico stores 2,359 - 2,035 - 182 = 142. Other share of net sales 6,406 / 159,514 = 4.0% (fiscal 2024), 5,055 / 47,861 = 10.6% (Q2 fiscal 2026). Sales per retail square foot 627.17 / 454.82 - 1 = +38% (fiscal 2019 to 2022), 599.92 / 627.17 - 1 = -4.3% (fiscal 2022 to 2024). Tariff refunds 685 / 47,861 = 1.4% of Q2 net sales; 685 / 16,115 = 4.3% of Q2 gross profit; refunds in inventory cost 730 - 685 = about 45. Receivables 5,597 / 4,903 - 1 = +14.2%. Capital: net debt 4,464 + 4,967 + 46,341 - 1,389 = 54,383 (1 February 2026); 316 + 4,582 + 48,485 - 1,659 = 51,724 (2 February 2025); 4,248 + 4,697 + 43,951 - 2,085 = 50,811 (2 August 2026); net debt / equity 54,383 / 12,813 = 4.2 times; goodwill and intangibles 22,344 + 10,329 = 32,673, 32,673 / 105,095 = 31.1% of total assets. Free cash flow 16,325 - 3,679 = 12,646 (fiscal 2025), 19,810 - 3,485 = 16,325 (fiscal 2024), 21,172 - 3,226 = 17,946 (fiscal 2023); dividends paid / free cash flow 9,152 / 12,646 = 72.4%; dividend per share / diluted EPS 9.20 / 14.23 = 64.7%; capex / net sales 3,679 / 164,683 = 2.2%. Average debt and equity 61,914 / 44,955 - 1 = +38%; SRS + GMS 18,028 + 5,081 = 23,109; interest expense 2,412 - 1,943 = 469; operating cash flow / dividends paid 16,325 / 9,152 = 1.8 times; free cash flow 12,646 / 17,946 - 1 = -30%; dividend per share 9.00 / 8.36 - 1 = +7.7%, 9.20 / 9.00 - 1 = +2.2%, 2.33 / 2.30 - 1 = +1.3%. Repurchases fiscal 2015-2023: 7,000 + 7,000 + 8,002 + 10,000 + 7,000 + 597 + 15,001 + 6,504 + 8,074 = 69,178; diluted shares 995 / 1,283 - 1 = -22%. H1 fiscal 2026 EPS 8.09 / 14.23 = 57%. Market: 292.52 / 14.26 = 20.5 times trailing earnings; 292.52 / 169.18 = 1.73 times sales; 292.52 / 433.37 - 1 = -32.5% from the end-2021 value; Lowe's 106.20 / 292.52 = 36%, 90.43 / 169.18 = 53% of revenue; dividend yield 9.32 / 293.20 = 3.2%; trailing diluted EPS 14.23 + 8.09 - (3.45 + 4.58) = 14.29; trailing net income 292.52 / 20.52 = about 14.26bn - segments, sales, traffic and margins. — Fiscal 2015-2026 · publ. September 2026 · source ↗
    Method: Arithmetic on figures reported in The Home Depot's Forms 10-K and 10-Q, results releases and market data; operands shown in the source line.
Sources
Generated September 26, 2026