Home Depot (HD) 4th Quarter 2022 Results

A customer loads plywood into a truck outside a Home Depot store in Galveston, Texas on Tuesday, August 25, 2020.

Scott Dalton | Bloomberg | Getty Images

Home Depot’s revenue fell short of Wall Street’s estimates in its fiscal fourth-quarter earnings report on Tuesday.

The company also provided a muted outlook for next year amid tough consumer spending.

Here’s what the company released, compared to what Wall Street expected, based on a Refinitiv analyst survey:

  • Earnings per share: $3.30 vs. $3.28 expected
  • Revenue: $35.83 billion vs. $35.97 billion expected

It’s the first time Home Depot has missed Wall Street’s revenue expectations since November 2019, before the Covid pandemic. Shares of the company fell 4%.

In the quarter ended Jan. 29, The Home Depot recorded sales of $35.83 billion, up 0.3% from the prior year period, which recorded revenue of 35.72 billions of dollars. The retailer’s reported net profit of $3.36 billion was also 0.3% higher than the prior year period, which was $3.35 billion, or $3.21 per share.

Amid record levels of inflation, changing consumer behavior and a slowing housing market, the home improvement retailer has repeatedly exceeded high street expectations over the past year, but was a little below sales estimates.

The company attributed this solely to lower lumber costs, the price of which had jumped due to national shortages in fiscal 2021. The lumber decline negatively impacted comparable sales by 0.7%. , the company said.

Home Depot said it expects sales and same-store sales to be roughly flat for the new fiscal year. They forecast an operating margin rate of around 14.5%, which is impacted by a $1 billion investment Home Depot is making in wage growth.

Home Depot expects a mid-single-digit decline in diluted earnings per share.

The retailer’s chief financial officer, Richard McPhail, told CNBC that Home Depot provided a subdued outlook as he expects some pressure in the goods sector and stagnation in consumer spending.

“So we’re starting from kind of a fundamental assumption that consumer spending will be stable. We know that our market has seen a gradual shift that reflects the broader shift in the economy, from consumer spending on goods to services. “, said McPhail.

“During Covid we’ve seen a shift towards goods. Over the last two years we’ve seen a gradual pullback from goods towards services and we think our market has reflected that and we think that dynamic could exert some pressure on our market.”

Shoppers these days use their discretionary money for experiences and travel, as many burn through their savings amid constant inflation.

Still, McPhail insisted that the investments the company has made position them to “take part in any environment” and they are confident they will overcome any market pressures.

While the housing market has been relatively flat after a scorching 2021, the retailer believes high mortgage rates could prove beneficial to its bottom line.

“As mortgage rates go up, we’re seeing a kind of interesting dynamic among homeowners who are happy with their fixed rate mortgage and then decide to improve in place,” McPhail said.

“You just don’t have a lot of willing sellers in the market today…it fuels the trend to improve in place.”

The company will host an earnings call with investors at 9 a.m. ET.

Read the full earnings release here.

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