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

by | Feb 22, 2023 | Stock Market

Shares of Home Depot Inc. dropped to 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
fell 7.1% to $295.50, the lowest close since Nov. 9, 2022. The stock’s price decline of $22.45 was shaved about 148 points off the Dow Jones Industrial Average’s
price, while the Dow dropped 697.10 points, or 2.1%. 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 Tuesday’s closing stock price, the new annual dividend rate implies a dividend yield of 2.83%. That compares with the dividend yield of rival Lowe’s Companies’ stock
of 2.08% and the implied yield for the S&P 500 index
-2.0 …

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