Home Depot (HD) Q4 Earnings 2022

A customer loads plywood into a truck outside a Home Depot store in Galveston, Texas, Tuesday, Aug. 25, 2020.

Scott Dalton | Bloomberg | Good pictures

Home Depot’s revenue for its fiscal year fell short of Wall Street’s estimates Fourth Quarter Earnings Report tuesday

The company also gave a muted outlook for next year on a tough consumer backdrop.

Based on Refinitiv’s survey of analysts, here’s what the company released compared to what Wall Street expected:

  • Earnings per share: $3.30 vs. $3.28 expected
  • Revenue: $35.83 billion versus $35.97 billion expected

It was the first time Home Depot missed Wall Street’s earnings expectations since November 2019, before the Covid pandemic. Shares of the company fell 4%.

For the quarter ended Jan. 29, Home Depot reported sales of $35.83 billion, up 0.3% from a year earlier, which saw revenue of $35.72 billion. The retailer’s net income was $3.36 billion, up 0.3% from the year-ago period of $3.35 billion, or $3.21 per share.

Amid record levels of inflation, a shift in consumer behavior and a sluggish housing market, the home improvement retailer has repeatedly beaten the Street’s expectations over the past year, but fell slightly on sales estimates.

The company attributed the rise in prices due to nationwide shortages in fiscal 2021 and a fall in timber costs. The decline in sawmills negatively impacted comparable sales by 0.7%, the company said.

Home Depot expects sales and comparable sales to be roughly flat in the new fiscal year. They project an operating margin rate of about 14.5%, which translates into Home Depot’s earnings growth on a $1 billion investment.

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Home Depot expects a mid-single-digit percentage decline in diluted earnings per share.

Richard McPhail, the retailer’s CFO, told CNBC that Home Depot offered a muted outlook because it expects some pressure in the inventory sector and flat consumer spending.

“So we’re operating from the basic assumption that consumer spending will be flat. Our market has seen a gradual shift in consumer spending from goods to services, reflecting a broader shift in the economy,” McPhail said.

“During Covid, we’ve seen a shift to commodities. Over the last couple of years, we’ve seen a gradual shift from goods to services, and we think our market has reflected that, and we think that dynamic may put some pressure on our market.”

These days, shoppers are putting their discretionary dollars toward experiences and many are burning through their savings amid persistent inflation.

However, McPhail said the firm has positioned the investments to “take stock in any environment” and that they are confident they will weather any market pressures.

Although the housing market remains relatively stagnant beyond 2021, the retailer thinks higher mortgage rates will benefit its results.

“As mortgage rates go up, we’re seeing kind of an interesting dynamic in homeowners who are happy with a fixed-rate mortgage and then decide to upgrade that place,” McPhail said.

“You don’t have a lot of preferred sellers in the market today… and that’s what’s driving the trend of improving that space.”

The company will hold an earnings call with investors at 9 a.m. ET.

Read on Full earnings release here.

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