The logo of American home improvement chain Home Depot is seen in Mexico City, Mexico, on January 15, 2020.
Luis Cortes | Reuters
House deposit on Tuesday said quarterly sales were down nearly 3% year over year but beat Wall Street's profit and revenue expectations despite weaker demand.
The home improvement retailer said it expects total sales to grow about 1% in fiscal 2024, which includes an additional week. That compares with a 1.6% increase expected by Wall Street, according to StreetAccount. Home Depot also anticipates opening about a dozen new stores during the year.
In a call with CNBC, Chief Financial Officer Richard McPhail said demand fell throughout the year as consumers returned to more typical spending patterns. He added that falling lumber prices and rising interest rates hurt the business.
Home Depot now sees an opportunity to return to growth, McPhail said.
“Our market is returning to normal demand conditions,” he said. “We're not there yet, but the pressures we saw in 2023 are easing.”
Here's what the company reported for the three months ended Jan. 28 compared to what Wall Street expected, according to 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
Home Depot shares fell more than 3% in premarket trading.
Fiscal fourth-quarter net income fell to $2.8 billion, or $2.82 per share, from $3.36 billion, or $3.30 per share, a year earlier.
net sales decreased from $35.83 billion in the same period last year.
Home Depot has faced a tougher sales environment over the past year. The home improvement retailer is following a more than two-year period in which Americans had more time and money to spend painting and fixing up their homes during the Covid-19 pandemic.
The company has also felt a pullback in consumer spending, particularly on big-ticket items, as some families postpone discretionary purchases due to inflation, postpone purchasing a new home due to higher interest rates or choose to spend on experiences instead of goods.
Throughout the past year, McPhail and CEO Ted Decker described 2023 as “a year of moderation” after huge gains during the pandemic.
On Tuesday, McPhail said customers are still postponing larger projects — especially large-scale projects that may require a loan — because of higher borrowing costs.
However, he said sales during the fourth quarter were fairly consistent, except for a drop in January due to colder, wetter weather. He said that temporary decline had no bearing on the company's prospects for next year.
Average ticket and customer transactions decreased in the fourth quarter compared to the same period a year ago. The average ticket fell to $88.87 from $90.05 in the same quarter a year ago, reflecting a more typical pricing environment, McPhail said.
As of Friday's close, Home Depot shares were up nearly 5% this year. That roughly matches the S&P 500's gains over the same period. The company's shares closed at $362.35 on Friday, raising Home Depot's market value to about $360 billion.
This story is developing. Please check for updates.
