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Home Depot’s Q4 Sales Dip Amid Rising Mortgage Rates and Inflation Pressures

Bruno T
Latest News
February 20 2024 1:57AM

Home Depot (NYSE:HD) experienced a decline in sales during the fourth quarter as the leading home improvement retailer in the country dealt with the repercussions of elevated mortgage rates and inflation affecting its clientele.

Although the quarterly outcomes surpassed the expectations set by Wall Street, the company’s projected sales for the upcoming year put early pressure on its stock value.

The stock value dipped over 3% prior to Tuesday’s market opening. Competitor Lowe’s, set to announce its fourth-quarter earnings the following week, saw a decrease of over 2%.

Home Depot disclosed a fourth-quarter revenue of $34.79 billion, a drop from the $35.83 billion reported in the same period the previous year. However, this figure still exceeded the $34.55 billion anticipated by analysts according to Zacks Investment Research.

Comparable store sales, a crucial measure of a retailer’s performance, decreased by 3.5%. Specifically, in the U.S., comparable store sales saw a 4% reduction.

CEO Ted Decker remarked in a statement, “Following three years of remarkable growth for our business, 2023 was a year of scaling back.”

The past week saw the average long-term mortgage rate in the U.S. escalate to its peak in 10 weeks. Freddie Mac, a mortgage purchaser, reported that the rate for a 30-year mortgage climbed to 6.77% from 6.64% the previous week. This rate was at an average of 6.32% a year earlier.

This rise mirrors the trends in the 10-year Treasury yield, which is a benchmark for loan pricing by lenders. Unexpectedly high inflation reports, a robust job market, and the general economic vigor have heightened concerns that the Federal Reserve might postpone the reduction of interest rates.

An increase in mortgage rates can significantly raise the monthly expenses for homeowners, thereby limiting their purchasing power in an already challenging market for many Americans. It also deters homeowners who secured extremely low rates a couple of years ago from putting their properties on the market. The current average rate for a 30-year mortgage is significantly higher than the 3.92% observed just two years back.

In the quarter ending January 28, Home Depot Inc. reported earnings of $2.8 billion, or $2.82 per share, down from the $3.36 billion, or $3.30 per share, earned the previous year.

This performance exceeded the Wall Street projection of $2.77 per share.

Home Depot forecasts a sales growth of approximately 1% for fiscal 2024, including an additional 53rd week. The company expects a nearly 1% decline in comparable store sales over the 52-week span.

Furthermore, the company announced on Tuesday a 7.7% increase in its quarterly dividend, raising it to $2.25 per share.