Earnings Results: Home Depot stock sinks after sales miss and downbeat outlook, offsetting profit beat and dividend hike

United States

Shares of Home Depot Inc. dropped toward a 3 1/2-month low Tuesday, after the home improvement retail giant reported fiscal fourth-quarter sales that missed and provided a downbeat outlook, citing persistent inflation, continued supply chain disruptions and a tight labor market.

The disappointing sales performance offset a profit beat and a raised dividend, and a plan to invest $ 1 billion in wages for its employees.

The stock HD, -6.58% fell 6.0% in afternoon trading, putting it on track for the lowest close since Nov. 9, 2022. The stock’s price decline of $ 19.09 was shaving about 126 points off the Dow Jones Industrial Average’s DJIA, -2.06% price, while the Dow dropped 621 points, or 1.9%.

Net income for the quarter to Jan. 29 rose to $ 3.36 billion, or $ 3.30 a share, from $ 3.35 billion, or $ 3.21 a share, in the same period a year ago. That topped the FactSet consensus for earnings per share of $ 3.28.

Net sales grew 0.3% to $ 35.83 billion, but was below the FactSet consensus of $ 35.97 billion, as same-stores sales declined 0.3% versus expectations of a 0.3% increase.

Cost of sales rose less than sales, up 0.2% to $ 23.91 billion, as gross margin improved to 33.3% from 33.2%.

The value of merchandise was $ 24.89 billion as of Jan. 29, up 12.8% from a year ago but down 3.2% from $ 25.72 billion at the end of October.

For fiscal 2023, the company expects sales to be flat versus fiscal 2022 and earnings per share to decline in the “mid-single digits” percentage range, while the current FactSet sales consensus of $ 158.0 billion implies 0.4% growth and the EPS consensus of $ 16.70 implies 0.1% growth.

Don’t miss: Home Depot sees home-improvement market declining if consumer demand keeps shifting to services from goods.

Separately, the company said it raised its quarterly dividend by 10%, to $ 2.09 a share from $ 1.90 a share. At current stock prices, the new annual dividend rate implies a dividend yield of 2.80%. That compares with the dividend yield of rival Lowe’s Companies’ stock LOW, -5.20% of 2.08% and the implied yield for the S&P 500 index SPX, -2.04% of 1.70%.

Home Depot also said it will invest an additional $ 1 billion in annualized wages for its hourly, frontline employees.

“The most important investment we can make is in our people,” said Chief Executive Ted Decker. “We believe this investment will position us favorably in the market, enabling us to attract and retain the level of talent needed to sustain the customer experience we strive to deliver.”

The stock has fallen 5.7% over the past three months, while Lowe’s shares have shed 3.8% and the Dow has slipped 1.5%.