Key takeaways
- Home Depot Inc. is projected to post an 18% drop in net income and a nearly 4% decline in revenue for its fiscal fourth quarter ended in January.
- The retailer's average sales per square foot is projected to fall 4% as consumers stop buying big-ticket items.
- The store's comparable sales are expected to decline for the fifth consecutive quarter.
Drag down by lower sales volumes, Home Depot Inc. (High Definition) is expected to report declines in profits and revenue when it reports its final earnings report before markets open on Tuesday.
Home Depot report comes later beat earnings expectations last quarter, even though sales declined during the quarter. Lower consumer demand led the retailer to project revenue would decline 3% to 4% for the full fiscal year.
For the fiscal fourth quarter ending in January, Home Depot is projected to generate $34.52 billion in revenue, a drop of nearly 4% from the same quarter a year ago, according to research from Visible Alpha. The home improvement retailer's net revenue is expected to fall 18% from the prior-year quarter to reach about $2.74 billion, while its earnings per share (EPS) It is expected to fall to $2.75 from $3.30.
| Analyst estimates for the fourth quarter of fiscal year 2023 |
Third quarter of 2023 | Fourth quarter of 2022 | |
|---|---|---|---|
| Revenue | $34.52 billion | 37.71 billion dollars | $35.83 billion |
| Earnings per share | $2.75 | $3.81 | $3.30 |
| Net income | 2.74 billion dollars | $3.81 billion | 3.36 billion dollars |
Key Metric: Big-ticket Items
While US retail sales were strong in 2023Home Depot has said inflation still caused consumers to slow their grocery purchases. expensive items such as washing machines, lawnmowers and furniture.
In its third-quarter earnings report, the retailer's average consumer ticket decreased slightly compared to a year ago. For the fourth quarter, analysts project that the retailer's average sales per square foot will decline for the fourth consecutive quarter, falling more than 4%.
Inflation has been decreasing, but in the latest report, the Consumer Price Index (CPI) showed that it has been stubbornly slow ease. Investors will be watching Home Depot's earnings report to see if inflation continues to have an impact on the home improvement market.
Business Focus: Comparable Store Sales
After weathering the pandemic with strong sales growth fueled by the home improvement shutdown trend, that momentum came to a halt in the first quarter of 2023, when Home Depot's revenue came in lower than expected for the first time in 20 years.
Home Depot is projected to post its fifth consecutive quarterly decline in comparable store sales, but analysts do not expect as sharp a drop in the sales metric as was published at the beginning of the fiscal year. For the Christmas quarter, comparable store sales are projected to fall 4.4%, compared to a 0.3% drop in the same quarter a year ago.
While Home Depot's sales in recent quarters have been volatile, its stock price has withstood the shocks. Through Friday's close, Home Depot shares had gained 4.6% so far this year, after its shares rose more than 8% in 2023.
