Net sales of $11.3bn beat the API Ninjas estimate of $11,195m by 0.9%, and diluted EPS of $2.48 beat the $2.01 estimate by 23.4%.
Roughly $0.25 of that EPS is tariff refunds net of reinvestment -- about half the beat -- and the company says it expects no material tariff-refund impact in the second half.
Same-store sales rose 3.5% on 2.0% traffic and 1.5% ticket, with growth in all four merchandising categories for a sixth straight quarter.
FY2026 diluted EPS guidance rose to $7.80-$8.00 from $7.20-$7.45, a raise larger than the tariff benefit already banked.
Key metrics
Metric
Reported
Prior year
Change
Net sales
$11.3bn
$10.7bn
+5.2%
Same-store sales
+3.5%
—
—
Gross profit as a percentage of net sales
32.6%
31.3%
+127bps
Operating profit
$769.2m
$595.4m
+29.2%
Net income
$550.3m
$411.4m
+33.8%
Tariff refund benefit to diluted EPS (after reinvestments)
approximately $0.25
—
—
Guidance changes
Item
New guidance
Prior guidance
FY2026 net sales growth
approximately 4.0% to 4.3%
3.7% to 4.2%
FY2026 same-store sales growth
approximately 2.5% to 2.9%
2.2% to 2.7%
FY2026 diluted EPS
approximately $7.80 to $8.00
$7.20 to $7.45
FY2026 share repurchases
up to $700 million
—
FY2026 capital expenditures
$1.4 billion to $1.5 billion
$1.4 billion to $1.5 billion (unchanged)
Quality of earnings
Of the 127-basis-point gross margin expansion, approximately 81 basis points is tariff refunds after related reinvestments; the operating-margin benefit was approximately 66 basis points.
The remaining 46 basis points of the 127-basis-point gross margin gain came from a lower LIFO provision and lower distribution costs, partially offset by increased markdowns and transportation costs.
Net interest expense fell 25.7% to $42.9m, adding about $15m of pre-tax income that has nothing to do with store performance.
Gotchas & watch items
The effective tax rate rose to 24.2% from 23.5% on expired federal tax credits, and full-year guidance assumes approximately 24.5%.
SG&A was flat at 25.8% of net sales with depreciation and amortization rising, so the margin gain came entirely from gross profit.
Merchandise inventories were $6.6bn against $6.6bn a year ago, down only 2.7% per store while sales grew 5.2%.