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The
No. 1 U.S. home improvement chain posted a surprise drop in
fourth-quarter comparable sales, sending its shares down more
than 4% in premarket trading.
Shares of smaller rival Lowe's Cos Inc also slipped after Home
Depot's dour forecast amid a strained U.S. housing market.
Following an exponential surge in remodeling activity during the
pandemic, demand for home improvement tools such as paint and
flooring is now cooling as consumers cut back spending.
Wall Street analysts have warned that home improvement chains
are set for a challenging 2023.
Contractor sales soured in December from a month earlier, Wells
Fargo analysts have said. A survey by the brokerage showed about
40% of contractors said backlogs were getting weaker heading
into the year.
Home Depot said comparable sales fell 0.3% in the fourth quarter
ended Jan. 29, compared with analysts' average estimate of a
0.56% increase. Customer transactions fell 6% in the quarter.
The company said it expects earnings per share to decline in the
mid-single digits percentage range for 2023, while analysts were
expecting a 0.4% increase to $16.72, according to Refinitiv
data.
Home Depot is seeing elevated costs across its supply chain
despite taking cost control measures, while a tight U.S. labor
market has prompted it to invest more in employee wages and
benefits.
Home Depot said it would spend an additional $1 billion in
annualized compensation for its frontline, hourly associates,
starting from the first quarter of 2023.
It also projected 2023 sales growth to be flat compared to
fiscal 2022.
(Reporting by Deborah Sophia in Bengaluru; Editing by Arun
Koyyur)
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