A Home Depot store in Los Angeles, Calif., on March 17, 2015.Lucy Nicholson/Reuters
Home Depot Inc. HD-N forecast full-year results below analysts’ estimates on Tuesday, signalling that lacklustre demand would continue to pressure the company this year as people tighten spending on home remodelling amid sticky inflation.
With food prices and borrowing costs still elevated, customers are limiting home-related spend to just essential repair and maintenance rather than undertaking larger renovations.
Foot traffic at the No. 1 U.S. home improvement chain fell in the fourth quarter, with declines worsening toward January owing to harsh winter weather, Placer.ai data showed.
“The home improvement market still faces headwinds … we are planning for a year of continued moderation but with slightly less pressure to [sales] than what we faced in fiscal 2023,” Home Depot CFO Richard McPhail said.
The back half of 2024 would be “marginally stronger,” chief executive Ted Decker said.
Home Depot expects 2024 comparable sales to decline about 1 per cent, while analysts estimate a 0.06-per-cent rise, LSEG data showed. The company’s shares fell about 1 per cent.
“I’m not overly alarmed by the guidance … the timing of [recovery] is the big question mark,” said Sarah Henry, managing director and portfolio manager at Logan Capital Management.
Still, the consumer backdrop appeared strong, Ms. Henry added. Retail bellwether Walmart issued an upbeat annual sales forecast.
Fourth-quarter transactions at Home Depot fell 1.7 per cent, logging their 11th straight quarterly decline, while comparable sales dropped a bigger-than-expected 3.5 per cent.
“There was an expectation … that the company could return to growth sooner than they’re guiding to,” said Jonathan Reid, a director at Fitch Ratings.
Home Depot forecast 2024 per-share earnings to grow about 1 per cent, below expectations of a 3.62 per cent rise.
Shares of Lowe’s, which reports results next week, also dropped 1.5 per cent.
“I wouldn’t say [the forecast] is a big red flag … it’s a little yellow flag,” D.A. Davidson analyst Michael Baker said.