Home Depot Inc. shares fell after the home-improvement retailer forecast a fiscal-year profit decline alongside plans for a $1 billion wage investment for hourly workers.
(Bloomberg) — Home Depot Inc. shares fell 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.
“We still see a healthy customer, we have job growth, growing wages, still-strong balance sheets,” Chief Executive Officer Ted Decker said on a call with analysts. “But we do see a unique environment with many cross-currents right now. Given all that, we do expect moderation in home improvement demand.”
Shares were down 5.1% at 9:48 a.m. in New York.
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,” Decker said in a statement.
Home Depot has benefited in recent quarters from solid sales growth due to higher prices for big-ticket items.
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.
(Updates with shares at the market open, additional commentary.)
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