Home Depot, the popular home improvement retailer, has reported a decline in sales for the fourth quarter of the fiscal year. However, despite this setback, the company managed to surpass Wall Street’s expectations for earnings and revenue. Home Depot expects total sales to grow by approximately 1% in fiscal 2024, including the addition of an extra week. This projection is slightly lower than the 1.6% increase anticipated by Wall Street analysts.
Chief Financial Officer Richard McPhail attributed the decline in demand to consumers returning to more typical spending patterns. He also mentioned that falling lumber prices and rising interest rates have negatively impacted the business. However, McPhail expressed optimism about the future, stating that the market is gradually returning to normal demand conditions.
In terms of financial performance, Home Depot reported earnings per share of $2.82, surpassing the expected $2.77. Revenue for the quarter amounted to $34.79 billion, slightly higher than the anticipated $34.64 billion. Despite these positive results, Home Depot’s shares fell over 2% in premarket trading.
The company’s net income for the fourth quarter decreased to $2.80 billion, or $2.82 per share, compared to $3.36 billion, or $3.30 per share, in the previous year. Net sales also experienced a decline from $35.83 billion in the year-ago period.
Home Depot has faced challenges in sales over the past year due to changing consumer behavior during the Covid-19 pandemic. With more time and money available, Americans engaged in home improvement projects. However, as the pandemic situation improved and inflation increased, consumer spending on big-ticket items decreased. Families postponed discretionary purchases, delayed home purchases due to higher interest rates, or chose to spend on experiences rather than goods.
Throughout 2023, Home Depot experienced a moderation in sales growth after the exceptional gains during the pandemic. The company serves both home professionals and do-it-yourself shoppers, with each group contributing approximately half of its business. McPhail noted that customers are still deferring larger projects, especially those requiring loans, due to higher borrowing costs.
Despite these challenges, Home Depot observed consistent sales throughout the fourth quarter, except for a decline in January attributed to colder and wetter weather. However, this temporary drop did not affect the company’s outlook for the upcoming year.
During the fourth quarter, both the average ticket and customer transactions declined compared to the previous year. The average ticket price dropped from $90.05 to $88.87, reflecting a more typical pricing environment. McPhail explained that prices of items are currently lower than a year ago when Home Depot and its suppliers faced higher costs of products and transportation rates. However, since August, prices have remained stable, and the company expects them to stay at current levels for some time.
Despite the challenges faced by Home Depot, its shares have performed well this year, with a nearly 5% increase. This growth aligns with the gains of the S&P 500 during the same period. As of Friday’s close, Home Depot’s shares were valued at $362.35, resulting in a market value of approximately $360 billion.
While Home Depot continues to navigate changing market conditions and consumer behavior, the company remains optimistic about its future prospects. With expectations of returning to growth and plans to open new stores, Home Depot aims to maintain its position as a leading home improvement retailer.
