A customer loads plywood to a truck outside a Home Depot store in Galveston, Texas, on Tuesday, Aug. 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 Tuesday.
The company also provided a muted outlook for the next year amid a tough consumer backdrop.
Here’s what the company posted, compared to what Wall Street was anticipating, based on a survey of analysts by Refinitiv:
- 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 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, Home Depot reported $35.83 billion in sales, up 0.3% from the year ago period, which saw $35.72 billion in revenue. The retailer’s reported net income of $3.36 billion was also 0.3% higher than the year ago period, which was $3.35 billion, or $3.21 per share.
Amid record levels of inflation, a shift in consumer behavior and a housing market slowdown, the home improvement retailer has repeatedly beat the Street’s expectations over the last year but fell a bit short in sales estimates.
The company attributed that solely to a drop in lumber costs, which had surged in price due to nationwide shortages in fiscal 2021. The drop in lumber negatively impacted comparable sales by 0.7%, the company said.
Home Depot said it expects sales and comparable sales to be approximately flat for the new fiscal year. They project an operating margin rate of about 14.5%, which is impacted by a $1 billion investment Home Depot is making in wage growth.
Home Depot expects a mid-single digit percent decline in diluted earnings-per-share.
The retailer’s CFO, Richard McPhail, told CNBC that Home Depot provided a muted outlook because it expects some pressure in the goods sector and flat consumer spending.
“So we work from kind of a fundamental assumption that consumer spending will be flat. We know that our market has seen a gradual shift that reflects the broader shift in the economy, in consumer spending from goods to services,” said McPhail.
“During Covid, we saw a shift into goods. Over the last really almost two years, we’ve seen a gradual shift back away from goods into services and we think our market has reflected that and we think that that dynamic could put some pressure on our market.”
These days, shoppers are using their discretionary dollars towards experiences and travel as many burn through their savings amid consistent inflation.
Still, McPhail insisted investments the company has made positions them to “take share in any environment” and they’re confident they’ll overcome any market pressures.
While the housing market has been relatively stagnant following a red-hot 2021, the retailer thinks high mortgage rates could prove beneficial for its results.
“As mortgage rates increase, we see a kind of an interesting dynamic in homeowners who are happy with their fixed rate mortgage and then decided to improve in place,” said McPhail.
“You just don’t have very many willing sellers in the market today… that is driving the tendency to improve in place.”
The company will host an earnings call with investors at 9 a.m. ET.
Read the full earnings release here.
