Dive Brief:
- Fourth-quarter sales at The Home Depot slid to $34.8 billion, down 2.9% from a year ago, while comparable sales for the quarter fell 3.5%. Net earnings also fell nearly 16.7% to $2.8 billion, down from $3.4 billion last year, the company said in a Tuesday earnings announcement.
- Home Depot’s full-year sales were $152.7 billion, down 3% from a year ago, while comparable sales for the full year fell 3.2%. Net earnings for the year were $15.1 billion, down 11.5% from $17.1 billion a year ago.
- For the upcoming year, Home Depot expects comp sales to decline about 1%, total sales to rise about 1% and gross margin to be 33.9%. The company also expects to open about 12 new stores this year.
Dive Insight:
President and CEO Ted Decker described 2023 as a year of moderation following three years of exceptional growth. The home improvement retailer started last year “with more inventory than we would’ve preferred,” Decker said, according to a Seeking Alpha call transcript.
Last summer, the company said it wanted to reduce fixed costs by $500 million in 2024. Executives said the company is on track to realize that goal this year. Decker also said the company’s inventory position has since improved.
Last year, The Home Depot announced plans to invest $1 billion into increased compensation for hourly frontline employees. The company on Tuesday also reported about $3.2 billion in capital expenditures for the year, which included opening 13 new stores, giving the retailer a store count of 2,335 at the end of the year.
But the economic climate continues to impact consumer behavior. Executive Vice President of Merchandising Billy Bastek said the retailer ended the year with continued softness in some big-ticket discretionary purchases. However, while consumers are deferring bigger projects, they are moving forward with smaller ones.
Sales on digital platforms also rose 2% in Q4 compared to last year. And nearly half of Q4 online orders were fulfilled through stores, Bastek said. Home Depot announced in June that it plans to open about 80 new stores over the next five years.
Wedbush analysts led by Seth Basham described Home Depot’s full-year guidance as conservative but noted that the company is likely to face less pressure from compensation given last year’s $1 billion investment in pay. Basham also said the company doesn’t want to repeat a move it made last year to reduce its full-year guidance after soft first-quarter results.
“We continue to see [Home Depot] as a solid way to play the eventual home improvement retail recovery later this year and into 2025 as interest rates decline and home sales accelerate from multi-decade lows,” Basham said. “It is no surprise that big ticket demand trends remain soft, but it is reassuring that trends are not worsening and are bound to recover in the coming quarters as headwinds fade.”
