Home Depot lowers sales forecast due to weaker demand.

Home Depot Cuts Annual Sales Forecast and Projects Steeper Profit Decline

Home Depot Inc, the largest U.S. home improvement chain, has cut its annual sales forecast and projected a steeper decline in profit than previously expected. This comes as Americans cut back on spending on tools and building materials due to sticky inflation. As a result, shares of the company tumbled about 4% in premarket trading after it missed first-quarter sales estimates, hit by adverse weather and falling lumber prices. Smaller rival Lowe’s Cos Inc also saw a 3% drop in shares.

Home Improvement Retailers Lose Pandemic-Era Sparkle

Home improvement retailers have now lost their pandemic-era sparkle, as consumers shift focus away from home renovations and spend on travel, vacations, and other services. This drove a 4.8% drop in quarterly transactions at Home Depot. The company’s finance chief, Richard McPhail, said demand was softening even further compared to the company’s expectations.

Big Week for Earnings from U.S. Retailers

Home Depot kicks off a big week for earnings from U.S. retailers on a gloomy note. Target Corp and Walmart Inc are scheduled to report on Wednesday and Thursday, respectively. With weather in March being unusually wet and cold across many parts of the United States, customers also put off work on projects around their houses, further denting sales at a time when lumber prices have declined.

Revised Sales and Profit Forecasts

The company now expects comparable sales to decline between 2% and 5% in fiscal 2023, compared to its prior outlook for sales to remain nearly flat. Analysts were expecting comparable sales to decline 0.9% this year, according to Refinitiv IBES data. The company forecast earnings per share to decline between 7% and 13%, compared to prior expectations for a mid-single digits decline. Home Depot’s first-quarter comparable sales decreased 4.5%, missing estimates of a 1.74% drop. However, the company posted a profit of $3.82 per share, above estimates of $3.80.

Conclusion

Home Depot’s revised sales and profit forecasts are a reflection of the current economic climate. As consumers shift their focus away from home renovations, the company is feeling the impact of sticky inflation and adverse weather conditions. It remains to be seen how other U.S. retailers will fare in the coming days, but the outlook is not looking bright.