The logo of American home improvement chain Home Depot is seen in Mexico City, Mexico on January 15, 2020.
Luis Cortés | Reuters
DIY store said Tuesday that quarterly revenue fell nearly 3% year over year, but beat Wall Street profit and revenue expectations despite lower demand.
The home improvement retailer said it expects total sales to grow about 1% in fiscal 2024, including an additional week. That compares with an increase of 1.6% expected by Wall Street, according to StreetAccount. Home Depot also expects to open a dozen new stores over the course of the year.
On a call with CNBC, Chief Financial Officer Richard McPhail said demand for home improvements fell throughout the year as consumers spent more of their dollars on experiences. He added that falling lumber prices and rising interest rates are hurting the company.
Home Depot now sees an opportunity 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, but the pressure we saw in 2023 is easing.”
Here's what the company reported for the three-month period ending Jan. 28, compared to what Wall Street expected, based on a survey of analysts by LSEG, formerly Refinitiv:
- Earnings per share: $2.82 versus $2.77 expected
- Revenue: $34.79 billion vs. $34.64 billion expected
Shares of Home Depot fell nearly 2% in premarket trading.
Fiscal fourth-quarter net income fell to $2.80 billion, or $2.82 per share, from $3.36 billion, or $3.30 per share, a year earlier.
Net turnover decreased from $35.83 billion in the same period a year ago.
Home Depot has faced a tougher sales environment over the past year. The home improvement store follows a more than two-year period in which Americans had more time and money to spend on painting and renovating their homes during the pandemic.
The company has also felt a downturn in consumer spending, especially on high-end items, as some families delay purchases due to inflation, delay purchasing a new home due to higher interest rates or choose to spend money on experiences instead of goods.
Over the past year, McPhail and CEO Ted Decker described 2023 as “a year of moderation” after outsized gains during the pandemic.
On Tuesday, McPhail said customers are still delaying larger projects — especially the large-scale projects that may require a loan — because of higher financing costs.
Still, he said sales were fairly consistent throughout the fourth quarter, apart from a dip in January due to colder and wetter weather. He said the temporary decline had no impact on the company's prospects for the coming year.
Average ticket and customer transactions both declined 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 last year, reflecting a more typical pricing environment, McPhail said.
As of Friday's close, shares of Home Depot were up nearly 5% this year. That roughly matches the S&P 500's gains over the same period. The company's shares closed Friday at $362.35, putting Home Depot's market value at about $360 billion.
This story is developing. Check back later for updates.
