ATLANTA (AP) — The Home Depot posted strong profits in its final quarter of 2022 but said it expects profits to slip this year, sending shares of the home improvement retailer skidding at the opening bell Tuesday.
Home Depot has excelled over the past several year with so many people hunkered down at home, or searching for a new home in a pandemic. That boom has eased for a number of reasons and Americans are spending more on services outside the home now, diminishing some of the supercharged ring-ups of recent years at Home Depot.
The Atlanta company had a fourth-quarter profit of $3.36 billion, or $3.30 per share, which is 3 cents better than Wall Street had expected, according to a survey of analysts by Zacks Investment Research.
Quarterly revenue of $35.83 billion was just shy of forecasts, but the focus was on the retailer's expectations for 2023.
Home Depot expects a decline in annual per-share earnings in the mid-single-digit percentage, which caught industry analysts off guard. Wall Street was also projecting a slight uptick in sales, but Home Depot said that would likely be flat.
The company also said Tuesday that it would spend $1 billion on wage increases for its U.S. and Canadian hourly workers, starting this month.
Starting pay will be at least $15 per hour in all markets.
Shares fell almost 4% when markets opened.
Home Depot posted huge numbers during the pandemic as millions stuck at home either reworked the space where they lived, or found more spacious accommodations. All of that put the world's largest home improvement retailer in high demand, both for home owners, and on Wall Street.
The global economy, however, has been distorted as it tries to put the pandemic behind it, with inflation elevated everywhere and the booming housing market cooling down, partly due to actions taken by the Federal Reserve to cool inflation, namely raising interest rates.
U.S. home sales tumbled to the slowest pace in nearly a decade as soaring mortgage rates and sky high prices in 2022 pushed homeownership out of reach for many Americans.
"After a year of defying gravity, the slowing economy and pressures on consumers have finally caught up with Home Depot," said Neil Saunders, managing director of GlobalData. "To be fair, the final quarter results are not terrible – especially as they come off the back of a long period of extremely good growth – but they nevertheless represent a material slowdown and are the worst quarterly performance in two years."
The company also said it would increase its quarterly dividend by 10%, to $2.09, for an annual dividend of $8.36 per share.