A Home Depot bucket at a Home Depot store in Hercules, California, on Feb. 22, 2021.
David Paul Morris | Bloomberg | Getty Images
Home Depot on Tuesday said quarterly sales declined nearly 3% 12 months over 12 months, however it surpassed Wall Street’s earnings and revenue expectations despite the cooler demand.
On a call with CNBC, Chief Financial Officer Richard McPhail said demand dipped all year long as consumers returned to more typical spending patterns. He added that falling lumber prices and rising rates of interest hurt the business.
Home Depot now sees a likelihood to return to growth, McPhail said.
“Our market is on its way back to normal demand conditions,” he said. “We’re not quite there yet, however the pressures we saw in 2023 are receding.”
The house improvement retailer said it expects total sales to grow about 1% in fiscal 2024, which incorporates a further week. That compares with a 1.6% increase expected by Wall Street, based on StreetAccount. Nonetheless, Home Depot said it expects comparable sales, which take out the effect of store openings and closures, to say no about 1% during a period without the extra week.
Home Depot anticipates it’ll open a few dozen recent stores over the 12 months.
Here’s what the corporate reported for the three-month period that ended Jan. 28 compared with what Wall Street expected, based on a survey of analysts by LSEG, formerly Refinitiv:
- Earnings per share: $2.82 vs. $2.77 expected
- Revenue: $34.79 billion vs. $34.64 billion expected
Net income for the fiscal fourth quarter fell to $2.80 billion, or $2.82 per share, from $3.36 billion, or $3.30 per share, a 12 months earlier.
Net sales decreased from $35.83 billion within the year-ago period.
Home Depot shares fell barely during early trading Tuesday after the corporate shared its quarterly results and outlook.
Slowdown from pandemic boom
Home Depot has faced a tougher sales backdrop over the past 12 months. The house improvement retailer is following a greater than two-year period when Americans had more money and time to spend on painting and fixing up their homes throughout the Covid-19 pandemic.
About half of Home Depot’s business comes from home professionals and about half comes from do-it-yourself shoppers.
Over the past 12 months, McPhail and CEO Ted Decker described 2023 as “a 12 months of moderation” after the outsize gains throughout the pandemic. On an earnings call Tuesday, Decker compared the pandemic to a “giant hurricane” that created an unusual period of demand.
Home Depot has also felt a pullback in consumer spending, particularly on big-ticket items, as some families postpone discretionary purchases due to inflation, postpone buying a recent home because of upper rates of interest or decide to spend on experiences moderately than goods.
On Tuesday, McPhail told CNBC that customers are still pushing aside larger projects — especially the large-scale jobs that will require a loan — because of upper borrowing costs.
Yet, he said sales throughout the fourth quarter were pretty consistent, apart from a decline in January because of colder and wetter weather. He said that temporary drop didn’t factor into the corporate’s outlook for the 12 months ahead.
Decker said on the earnings call that shoppers showed they’re still willing to spend. Customers bought plenty of holiday decorations throughout the quarter.
The corporate also sold a record variety of totes during a storage event, and appliances was a better-performing category.
“The buyer is healthy and the patron is engaged,” he said. “They’re just engaged at this point in smaller projects.”
Stable prices, but housing market headwinds
Average ticket and customer transactions each declined within the fourth quarter compared with the year-ago period. The common ticket dropped to $88.87 from $90.05 within the year-ago quarter, reflecting a more typical pricing environment, McPhail said.
Prices of things are lower than a 12 months ago, a time when Home Depot and its suppliers handled higher costs of products and transportation rates, McPhail told CNBC. Since August, nonetheless, prices have remained regular.
“Our commentary is prices will likely remain at current levels for a while,” he said.
The housing market has complicated Home Depot’s outlook, too.
Home Depot is “neutral on housing within the short term,” McPhail said on Tuesday’s earnings call.
Home values have skyrocketed greater than 46% since 2019, he said, but turnover has dropped significantly. He said fewer moves have been “possibly offset by some level of improvement in place.”
As of Friday’s close, shares of Home Depot were up nearly 5% this 12 months. That roughly matches the gains of the S&P 500 throughout the same period. The corporate’s shares closed at $362.35 on Friday, bringing Home Depot’s market value to about $360 billion.