What happened
Shares of Home Depot (HD +5.04%) fell 7% on Tuesday after the home improvement retailer delivered a worrisome sales forecast.
So what
Home Depot's revenue rose less than 1% year over year to $35.8 billion in its fiscal 2022 fourth quarter ended Jan. 29. New store openings offset a slight decline in comparable store sales.
The number of customer transactions at the company's stores decreased by 6% to 378.5 million, as higher mortgage rates and recession fears weighed on the housing market. However, a 5.8% increase in Home Depot's average ticket price helped to offset the negative impact of lower traffic on its sales results.
In a press release, CEO Ted Decker said:
Our ability to deliver growth on top of the $40 billion of sales growth achieved over the prior two-year period, while navigating persistent inflation, ongoing global supply chain disruptions, and a tight labor market, is a testament to investments we have made in the business, as well as our associates' relentless focus on our customers.
NYSE: HD
Key Data Points
All told, Home Depot's net earnings inched up to $3.36 billion from $3.35 billion in the fourth quarter of fiscal 2021. Its earnings per share, which were boosted by stock buybacks, increased 2.8% to $3.30.
Now what
Yet investors appeared to focus more on Home Depot's guidance for fiscal 2023. Management expects the company's sales growth to remain flat compared to fiscal 2022, as ongoing macroeconomic challenges continue to suppress demand for the retailer's products and services.
Home Depot also warned that its earnings per share could decline by "mid-single digits" percentages. The retail giant said its operating margin would be negatively impacted by its plans to spend roughly $1 billion to boost compensation for its employees.
"The most important investment we can make is in our people," Decker said. "We believe this investment 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."
Still, Home Depot remains on solid financial footing. Its board of directors, in turn, raised its quarterly cash dividend by 10% to $2.09 per share. Following the dividend increase and today's stock price decline, Home Depot's shares now yield a respectable 2.8%.
