(Reuters) -Home Depot forecast full-year results below analysts’ estimates on Tuesday, signaling that lackluster demand would continue to affect the company this year as people tighten spending on home remodeling amid sticky inflation.
The company’s shares fell more than 2% premarket, after it also reported a bigger-than-expected drop in fourth-quarter sales.
With food prices and borrowing costs still elevated, customers are limiting home-related spend to just repair and maintenance rather than undertaking larger renovations, resulting in weak demand for discretionary categories such as flooring, kitchen and furniture.
Even as demand for key items such as plumbing and hardware have held up, Placer.ai data showed foot traffic at Home Depot fell in the fourth quarter, with declines worsening toward the end of the reporting period.
Home Depot forecast comparable sales to decline about 1% for 2024, while analysts expected a marginal rise of 0.06%, according to LSEG data.
“There was an expectation from the market that the company could return to growth sooner than they’re guiding to,” said Jonathan Reid, a director at Fitch Ratings covering the retail and consumer goods industries.
While the home-improvement industry is expected to recover in the second half of the year, analysts believe Home Depot will continue to experience near-term pressure.
Transactions at the retailer fell 1.7% in the fourth quarter, logging their eleventh straight quarterly decline.
The company forecast 2024 per-share earnings to grow about 1%, compared to analysts’ expectations of a 3.62% rise to $15.61.
Comparable sales fell 3.5% in the fourth quarter, versus estimates of a 3.3% drop, but a tighter lid on costs and easing supply chain expenses helped Home Depot post a per-share profit of $2.82, beating estimates of $2.77.
(Reporting by Granth Vanaik and Deborah Sophia in Bengaluru; Editing by Shounak Dasgupta)
