Home Depot Slumps on Forecast of Lower Profit as DIY Wanes

Feb 21st, 2023 7:53 EST

(Bloomberg) -- Home Depot Inc. shares fell in early trading after the home-improvement retailer forecast a fiscal-year profit decline alongside plans for a $1 billion wage investment for hourly workers.

Earnings per share will probably decline by a mid-single-digit percentage, Home Depot said Tuesday. Sales growth is expected to be flat in the year through January 2024.

The billion-dollar wage spending “will position us favorably in the market, enabling us to attract and retain the level of talent needed to sustain the customer experience we strive to deliver,” Chief Executive Officer Ted Decker said in a statement.

The outlook signals a slowdown in do-it-yourself spending and an increase in wage inflation. Home Depot has benefited in recent quarters from solid sales growth due to higher prices for big-ticket items.

Shares declined 3.9% at 7:52 a.m. in New York.

Home Depot’s outlook for flat fiscal-2023 comparable sales is “better than feared,” but when taking wage investments into account, “it’s hard to say that HD took the downside scenario off the table,” wrote Wells Fargo analysts led by Zachary Fadem.

Fourth-quarter comparable sales fell 0.3%, compared with analyst estimates of a 0.3% gain. Earnings rose to $3.30 a share in the quarter, topping the estimate of $3.27.

Home-improvement executives have said that higher home borrowing costs — which have doubled since early 2021 as a result of Federal Reserve rate hikes — would keep Americans from moving and encourage them to invest in renovations.

Still, consumers are feeling the pressure of inflation and economic uncertainty, and retailers are taking these factors into account when forecasting the year ahead. Walmart Inc. shares also tumbled early Tuesday after its outlook signaled challenges ahead.

--With assistance from Tonya Garcia.

©2023 Bloomberg L.P.


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