HD Home Depot Inc

By Sarah Nassauer and Allison Prang 

Home Depot Inc. tempered its sales targets for next year, saying the long U.S. economic expansion is expected to cool and the home-improvement chain will need more time for some investments to pay off in sales gains.

The company's 2020 forecast reflects slower growth in gross domestic product and a housing market that is positive but "not at a level that we've seen in prior years," Chief Executive Craig Menear told investors on Wednesday.

"We will continue to gain outsized share in our market," he said.

Buoyed by a strong housing market and low unemployment, Home Depot has enjoyed several years of robust sales growth even as some retailers, including its rival Lowe's Cos., have struggled. More recently, its growth has slowed.

For fiscal 2020, Home Depot said it expects total sales and comparable sales to rise by 3.5% to 4%. Analysts polled by FactSet, on average, were expecting same-store sales to increase 4.3%. Two years ago, executives were projecting comparable sales would rise 4.5% to 6% in 2020.

The Atlanta-based company, which operates nearly 2,300 stores, has missed same-store sales expectations for the last four fiscal quarters, according to FactSet, and hasn't reported annual same-store sales below 4% since fiscal 2012.

Home Depot executives said heading into 2020 U.S. consumer spending is healthy, boosted by low unemployment and rising wages. They also said the overall housing market is healthy, with home-equity rising and Americans staying in homes longer, making them more willing to spend on improvements.

"While we don't expect to see the same tailwinds in prior years, we do expect to see a positive influence from housing," said Richard McPhail, who recently took over as finance chief. The company estimates a 1.8% rise in GDP next year.

The company also lowered its operating profit forecasts for next year, citing in part higher theft from stores. Executives said they were working with law enforcement to counter what they said were organized crime groups. "We all hypothesize that this ties to the opioid crisis, but we're not positive about that," Mr. Menear said.

Home Depot's disappointing outlook comes not long after the company lowered its sales expectations for the current fiscal year.

The company has been working on revamping its supply chain to deliver products to customers faster. For example, it is investing $1.2 billion over five years on its supply chain and distribution centers to automate more of the delivery of lumber and other building materials rather than fulfill such online orders from stores.

Mr. Menear said in November that it was taking longer than expected for some of the company's strategic plans to show results

The company said it still expects fiscal 2019 sales to rise about 1.8%, with comparable sales on a 52-week basis up about 3.5%. It also backed its full-year earnings forecast of $10.03 a share.

Shares closed down 1.8% Wednesday at $212. The stock has gained about 18% over the past year.

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

December 11, 2019 16:56 ET (21:56 GMT)

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