✦ The Office of Pro AccelerationNarrow moat

Home Depot (HD) — the future bets

Home Depot has put its CFO in charge of making four Pro businesses sell each other's products, two weeks before he also had to stand in for the CEO.

Home Depot's newest bet is organisational. On 30 July 2026 it gave the chief financial officer, Richard McPhail, responsibility for an Office of Pro Acceleration geared at spearheading coordination across Home Depot Pro, HD Supply, SRS Distribution and Construction Resources1.

Other segment operating income ($M)201Q2 FY202516Q1 FY2026247Q2 FY2026Home Depot Q2 fiscal 2026 Form 10-Q; Q1 calculated as six months less Q2
Seasonal, and thin even in the spring.

The logic is in the annual report. The combined capabilities of the stores and SRS create greater value by sharing each other's product catalogues, logistics and supply chains2. A roofer who buys shingles from SRS could buy tools and fasteners from Home Depot; a property manager served by HD Supply could order appliances.

The reward, if it works, is in the Other segment's margin. It earned $247 million on $5,055 million of sales in the second quarter of fiscal 2026, 4.9%, against 6.4% a year earlier34.

The timing is awkward. Two weeks after the office was created, the chief executive took a temporary medical leave, and McPhail was named interim principal executive officer56.

The fourth business in the office, Construction Resources, is the least visible. It appears in the 8-K alongside Home Depot Pro, HD Supply and SRS Distribution7, but none of the filings gives it a figure. Coordinating four businesses of which only one reports its own results is the job McPhail now has.

This bet is narrow. Other segment operating income is the evidence: a margin back above the prior year's 6.4% within four quarters would show the coordination is producing profit, not just meetings.

Moat trajectory: Widening

Created July 2026; margins still below a year earlier.

The number that tests this moat
Reported
Other segment operating income, latest quarter
$247M (Q2 fiscal 2026) against $201M, 4.9% margin

The payoff from coordination; a margin back above 6.4% would show cross-selling works.

Source: Home Depot Form 10-Q, Q2 fiscal 2026 ↗
References
  1. ReportedOn 30 July 2026 it gave the chief financial officer, Richard McPhail, responsibility for an Office of Pro Acceleration geared at spearheading coordination across Home Depot Pro, HD Supply, SRS Distribution and Construction Resources.
    The Home Depot Form 8-K, item 5.02 - the 30 July 2026 reorganisation and the Office of Pro Acceleration across Home Depot Pro, HD Supply, SRS Distribution and Construction Resources. — August 2026 · publ. 21 August 2026 · source ↗
  2. ReportedThe combined capabilities of the stores and SRS create greater value by sharing each other's product catalogues, logistics and supply chains.
    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 earned $247 million on $5,055 million of sales in the second quarter of fiscal 2026, 4.9%, against 6.4% a year earlier.
    The Home Depot Form 10-Q for the quarter ended 2 August 2026 - segment results, product lines, online sales, IEEPA tariff refunds, the Mingledorff's acquisition and trailing ROIC of 24.8%. — Q2 fiscal 2026 · publ. 25 August 2026 · source ↗
  4. Moat Explorer calcIt earned $247 million on $5,055 million of sales in the second quarter of fiscal 2026, 4.9%, against 6.4% a year earlier.
    Moat Explorer calculation from The Home Depot's filings and market data ($ 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.
  5. ReportedTwo weeks after the office was created, the chief executive took a temporary medical leave, and McPhail was named interim principal executive officer.
    The Home Depot release, Form 8-K exhibit 99.1: interim management plans while chief executive Ted Decker takes a temporary medical leave. — August 2026 · publ. 12 August 2026 · source ↗
  6. ReportedTwo weeks after the office was created, the chief executive took a temporary medical leave, and McPhail was named interim principal executive officer.
    The Home Depot Form 8-K, item 5.02 - Richard McPhail designated interim principal executive officer. — August 2026 · publ. 12 August 2026 · source ↗
  7. ReportedIt appears in the 8-K alongside Home Depot Pro, HD Supply and SRS Distribution, but none of the filings gives it a figure.
    The Home Depot Form 8-K, item 5.02 - the 30 July 2026 reorganisation and the Office of Pro Acceleration across Home Depot Pro, HD Supply, SRS Distribution and Construction Resources. — August 2026 · publ. 21 August 2026 · source ↗
Sources
Generated September 26, 2026