Speaking to CNBC, Chief Financial Officer Richard McPhail said demand for home improvement supplies fell during the year as consumers spent more of their money on experiences. He added that falling lumber prices and rising interest rates were hurting business.
Home Depot now sees an opportunity to return to growth, McPhail said.
“Our market is on the 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 ended Jan. 28, compared to Wall Street expectations based on an analyst survey by LSEG, formerly Refinitiv:
- Earnings per share: $2.82 vs. expected $2.77
- Revenue: $34.79 billion vs. expected $34.64 billion
Shares of Home Depot fell nearly 2% in premarket trading.
Net income for the fiscal fourth quarter fell to $2.80 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 struggled with a tougher sales environment last year. The home improvement retailer is tracking a more than two-year period in which Americans were able to spend more time and money painting and renovating their homes during the pandemic.
The company also felt a decline in consumer spending, particularly on expensive items, as some families put off discretionary purchases due to inflation, put off buying a new home because of higher interest rates or choose to spend on experiences rather than goods.
Last year, McPhail and CEO Ted Decker called 2023 “a year of moderation” after outsized gains during the pandemic.
On Tuesday, McPhail said customers are still putting off larger projects – particularly large projects that may require a loan – due to higher borrowing costs.
However, he said sales were fairly consistent throughout the fourth quarter, except for a decline in January due to colder and wetter weather. He said the temporary decline would have no impact on the company's prospects for the coming year.
Both average ticket and customer transactions declined in the fourth quarter compared to the same period last year. The average ticket price fell to $88.87 from $90.05 in the year-ago quarter, reflecting a more typical pricing environment, McPhail said.
As of Friday's close, Home Depot shares were up nearly 5% this year. That's roughly in line with the S&P 500's gains over the same period. The company's shares closed at $362.35 on Friday, pushing Home Depot's market value to about $360 billion.
This story is developing. Please check back for updates.