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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Home Depot sales dip after ‘year of moderation;’ modest growth projected

Home Depot executives called 2023 “a year of moderation” that will improve only modestly in coming months.  (Dreamstime/Dreamstime/TNS)
By Michael E. Kanell The Atlanta Journal-Constitution

Home Depot on Tuesday reported a dip in both profits and revenues for the fourth fiscal quarter, as executives called 2023 “a year of moderation” that will improve only modestly in coming months.

The Georgia-based home improvement giant had revenues of $34.8 billion for the quarter, down 2.9% from the same period a year earlier, and finished the fiscal year with sales of $152.7 billion, a 3.0% decrease from the previous year.

Net earnings for the fourth quarter were $2.8 billion, down from $3.4 billion during the same period of fiscal 2022. Net earnings for the fiscal year were $15.1 billion, compared to net earnings $17.1 billion during the previous year.

After years of sometimes spectacular growth, Home Depot has been facing a housing market in flux, high interest rates and a falling, yet worrisome inflation while consumers have remained just worried enough about the economy to hedge their bets.

“Our customers continue to take on small projects while deferring the larger projects,” said Billy Bastek, executive vice president for merchandising during teleconference with industry analysts and reporters.

Yet executives said they feel the economic corner has been turned.

The fundamentals that drive the business – especially home ownership and household spending – are very strong, while the overall economy seems to have dodged a downturn, said Ted Decker, company chief executive, during the teleconference. “We think all the macro factors are lining up for a return to normality.”

Moreover, some of the “headwinds” the company faced last year are unlikely to be repeated, he said.

The Federal Reserve may not quickly lower interest rates, but economists think it will almost certainly not be raising them. And while last year’s hikes triggered a drop in home sales, the leveling of rates means the market has a chance for at least modest recovery.

Home Depot’s business is divided between do-it-yourselfers making improvements to their homes and contractors who are hired by owners who want a professional to do the work. When people change homes, they often make repairs, but high mortgage rates last year put a chill on sales.

“We are likely at a 40-year low in housing turnover, and we don’t see that going lower,” said Decker. “Then, do we get back to growth? I say, absolutely.”

Moreover, demand for repairs and improvements has increasingly been coming from people who aren’t moving who have spending money – or substantial equity in their homes to draw on, he said. “That $11 or $12 trillion increase has not been tapped.”

Many of those houses are in need of work since more than half the nation’s homes are more than 40 years old, Decker said.

Last year’s decline follows dramatic expansion.

Home Depot revenues have bulged nearly 40% since fiscal year 2019 as the pandemic sparked a sometimes spectacular surge in home repair, renovation and improvement.

Decker compared the deluge of sales and the way it ebbed last year to the pattern that typically follows a damaging storm, when an urgent need for extensive repairs is eventually followed by a decline in spending.

“The pandemic is playing out over a five-year period like a giant national storm,” he said. “The pandemic in a sense is a bit like a giant hurricane.”

Home Depot, which finished last year with 2,335 stores, plans to open 80 new stores during the next five years, including a dozen this year.

The stores will be placed either where there is robust population growth or too much demand for existing stores, officials said, but they declined to reveal any of the planned locations.

By revenues, Home Depot is the largest Georgia-based company. The 46-year-old company has about 465,000 employees, including roughly 34,000 in Georgia.

Last month, Home Depot acknowledged what it said were relatively modest layoffs, none of them in store roles. The company declined to say how many positions were cut or where the jobs had been.

The company’s overall workforce now is about 5,000 smaller than it was to start the year, according to company statements.

Home Depot also said Tuesday said it is raising its dividend 7.7% to the annual equivalent of $9 per share. The company will also use extra cash to buy back shares of its own stock, a move that tends to raise its price.

Home Depot stock was trading at just above $362 a share at mid-day Tuesday and dropped back after reaching a 52-week high of $364.16 earlier in the morning.