Home Depot Sales Slide For Fifth Quarter On Weak Housing Demand

Home Depot’s sales fell for the fifth straight quarter as the country’s largest home improvement retailer felt the impacts of higher mortgage rates that have put a big freeze on the housing market. 

Fourth-quarter revenue came in at $34.79 billion, down from $35.83 in the prior-year period. The figure still beat $34.61 billion that analysts surveyed by Bloomberg expected. 

Comparable sales, a key indicator of a retailer’s health, fell 3.5%. The retailer predicted a 1% decline in comparable revenue for this year. Analysts have been expecting a rise of .2%. 

Here’s a snapshot of fourth-quarter earnings (courtesy of Bloomberg): 

  • Comparable sales -3.5% vs. -0.3% y/y, estimate -3.63% (Bloomberg Consensus)
  • US comparable sales -4% vs. -0.3% y/y, estimate -3.78%
  • Net sales $34.79 billion, -2.9% y/y, estimate $34.61 billion
  • EPS $2.82 vs. $3.30 y/y
  • Customer transactions -1.7%, estimate -3.6%
  • Average ticket sales $88.87, -1.3% y/y
  • Average ticket -1.3%, estimate -0.35%
  •  Sales per square foot -3.6%
  • Merchandise inventories $20.98 billion, estimate $23.31 billion
  • Total location count 2,335, +0.6% y/y, estimate 2,335
  • SG&A expense $6.68 billion, +2% y/y, estimate $6.7 billion

And the fiscal 2024 forecast (courtesy of Bloomberg): 

  • Sees comparable sales about -1%, estimate +0.18%
  • Sees sales about +1%
  •  Sees operating margin about 14.1%, estimate 14.2%
  • Sees 53-week diluted EPS growth of about 1.0%

Shares of Home Depot are down 2% in premarket trading in New York. 

CEO Ted Decker wrote in a statement: “After three years of exceptional growth for our business, 2023 was a year of moderation.” 

Elevated mortgage rates have pushed mortgage applications to a multi-decade low. 

Even with the ongoing slowdown in the housing market, Wall Street analysts maintain optimism about the retailer’s long-term prospects. 

Just weeks ago, analysts at Wedbush Securities upgraded Home Depot from “neutral” to “outperform,” pointing to a “rebounding industry environment with healthy Pro and general employment, solid wage growth and homeowner spending power from continued home-price appreciation.”

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