by Deborah Mary Sophia
(Reuters) – The Home Depot warned on Tuesday of a slowdown in demand for home improvement products this year as inflation reduces customers’ ability to spend on new projects.
Home Depot stock fell 4.5% at 3:46 p.m. GMT on Wall Street.
The top U.S. home improvement chain forecasts mid-single digits percentage (4-6%) lower earnings per share for 2023, as analysts expected a 0.4% rise % at 16.72 dollars (15.69 euros), according to data from Refinitiv.
After exponential growth during the pandemic, demand for home improvement tools such as paint and flooring is now declining as consumers cut spending.
“We expect this year to be a year of moderating demand for home renovations,” Chief Executive Ted Decker said on a conference call after the earnings release.
Home Depot is also facing high production costs despite fiscal measures, while the tight US labor market has prompted it to increase payroll spending by $1 billion.
This increase in wages could cast doubt on the profitability of the company, according to analysts at Wells Fargo.
“The macro environment appears to have caught up with Home Depot,” also said DA Davidson analyst Michael Baker.
Home Depot’s like-for-like sales fell 0.3% in the fourth quarter, driven by a 6% drop in customer transactions. Analysts on average had expected a rise of 0.6%.
(Reporting by Deborah Sophia in Bangalore, French version Dina Kartit, editing by Kate Entringer)
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