Home Depot’s sales continued to fade during the fourth quarter as the country’s largest home improvement retailer feels the impact of high mortgage rates and inflation on its customers.
While quarterly results topped Wall Street expectations, the Atlanta company’s sales expectations for this year weighed on shares early.
Shares slipped more than 2% before the opening bell Tuesday. Rival Lowe’s, which reports fourth-quarter earnings next week, fell more than 2%.
Home Depot reported fourth-quarter sales of $34.79 billion, down from $35.83 in the prior-year period. That still beat the $34.55 billion that analysts surveyed by Zacks Investment Research expected.
Sales at stores open at least a year, a key indicator of a retailer’s health, fell 3.5%. In the U.S., same store sales declined 4%.
“After three years of exceptional growth for our business, 2023 was a year of moderation,” CEO Ted Decker said in a prepared statement.
A terrible climate for homebuyers is to blame, said Neil Saunders, managing director of GlobalData.
“Over Home Depot’s final quarter, we estimate that home sales in the U.S. dropped by 7.2% over the prior year. This continues to suck a lot of demand out of the market as home movers are, traditionally, big spenders on improvement,” Saunders wrote.
Home Depot is still a well run company, he said.
“It is easy to see these results as gloomy, but the current deterioration is more of a reset than a serious problem,” Saunders wrote. “Compared to 2019, annual sales remain up by 38.5% or $42 billion. So, this current plateau comes after a very steep climb.”
Last week, the average long-term U.S. mortgage rate rose to its highest level in 10 weeks. The average rate on a 30-year mortgage rose to 6.77% from 6.64% a week earlier, according to mortgage buyer Freddie Mac. A year ago, the rate averaged 6.32%.
The increase echoes moves in the 10-year Treasury yield, which lenders use as a…
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