Home Depot Shares Decline After Forecasting Low Profits and $1 Billion Wage Investment
Home Depot Inc. (NYSE:HD) shares declined in early trading Tuesday after the home-improvement retailer forecast a decline in fiscal-year profits and plans for a $1 billion wage investment for hourly workers. The stock has dropped 8.9% in the past 12 months, lagging the S&P 500 Index’s.
In the quarter ended January 29, Home Depot reported net income of $3.36 billion, or $3.30 per share, up 0.3% from the year-ago period. Revenue was $35.83 billion, also up 0.3%. Analysts surveyed by FactSet had expected Home Depot to report sales of $35.97 billion, compared with $35.72 billion in the same period last year.
The company’s board of directors approved a 10% increase in the quarterly dividend to $2.09 per share, which equates to an annual dividend of $8.36 per share. Shareholders who are on the records at the close of business on March 9, 2023 will receive their dividend on March 23, 2023. The Company has paid a cash dividend for 144 consecutive quarters.
The Home Depot anticipates that sales and comparable sales will be approximately the same for the upcoming fiscal year. Home Depot's projected operating margin rate of 14.5% has been affected by the $1 billion investment the company is making in wage growth. Analysts on Wall Street anticipated Home Depot's earnings per share to remain similar to 2022, while sales increased by 0.4%.
Going forward, the company anticipates earnings per share will decline by a mid-single-digit percentage, and sales growth is expected to be flat in the year through January 2024.
The home-improvement chain noted that its fourth-quarter revenue was below analyst expectations and that it expects full-year 2023 revenue growth and comparable sales growth to be approximately flat compared to 2022.
“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,” said Home Depot CEO Ted Decker in the release.
Lowe’s Companies Inc.
0. “Home Depot Could Be on Sale for a Bit After Disappointing Guidance” RealMoney, 21 Feb. 2023, https://realmoney.thestreet.com/investing/stocks/home-depot-could-be-on-sale-for-a-bit-after-disappointing-guidance-16116410
1. “Home Depot ‘one of the best long-term stories in retail,' analyst says” MarketWatch, 17 Feb. 2023, https://www.marketwatch.com/story/home-depot-one-of-the-best-long-term-stories-in-retail-analyst-says-12a730c5
2. “Home Depot misses on revenue, issues muted outlook” CNBC, 21 Feb. 2023, https://www.cnbc.com/2023/02/21/home-depot-hd-q4-earnings-2022.html
3. “Why Home Depot (HD) Shares Are Falling Today – Home Depot (NYSE:HD)” Benzinga, 21 Feb. 2023, https://www.benzinga.com/news/earnings/23/02/30982196/home-depot-posts-mixed-q4-earnings-hikes-dividend-by-10-forecasts-decline-in-fy23-eps
4. “The Home Depot Announces Fourth Quarter and Fiscal 2022 Results; Plans to Invest Approximately $1 Billion in Annualized Compensation for Frontline, Hourly Associates; Increases Quarterly Dividend by 10 Percent; Provides Fiscal 2023 Guidance” Yahoo! Voices, 21 Feb. 2023, https://www.yahoo.com/now/home-depot-announces-fourth-quarter-110000210.html
5. “Home Depot stock slips on sales miss, cautious guidance (NYSE:HD)” Seeking Alpha, 21 Feb. 2023, https://seekingalpha.com/news/3938219-home-depot-stock-slips-on-sales-miss-cautious-guidance
6. “Home Depot Earnings Mixed; HD Stock Slides As Higher Wage Costs Hit Outlook | Investor's Business Daily” Investor's Business Daily, 21 Feb. 2023, https://www.investors.com/news/home-depot-earnings-hd-stock-slides-wage-costs-hit-outlook/
7. “Home Depot Forecasts Earnings Drop This Year” The Wall Street Journal, 21 Feb. 2023, https://www.wsj.com/articles/home-depot-forecasts-earnings-drop-this-year-138dd0f8
8. “Lowe's Stock Slides Following Home Depot's Quarterly Results: What's Going On? – Lowe's Companies (NYSE:L” Benzinga, 21 Feb. 2023, https://www.benzinga.com/news/earnings/23/02/30985515/lowes-stock-slides-following-home-depots-quarterly-results-whats-going-on
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