Home Depot could still feel the brunt of inflation and higher labour costs on its bottom line in 1Q, according to analysts ahead of the retailer’s quarterly earnings.
After a disappointing 4Q that saw comparable sales fall 0.3% rather than gain the expected 0.3%, Home Depot warned its earnings per share for fiscal year 2023 could decline by a mid-single-digit percentage.
That news sent shares falling sharply in February, before finding a short-term base around the end of March.
“With the US housing market in the doldrums, you might expect more money to get spent on home improvements, although spending does tend to be limited during the winter months,” Michael Hewson, chief market analyst at CMC Markets wrote ahead of the firm’s 1Q results. Elsewhere on the 4Q balance sheet, the numbers “weren’t that bad,” according to Hewson, with net sales coming in at $35.83 billion, while profits beat expectations, coming in at $3.30 a share.
“The outlook, however, was disappointing with Home Depot forecasting flat sales growth for 2023, while operating margins are set to come in below 14.5% due to higher wage costs,” Hewson noted.
Home Depot is expected to report $38.6 billion in revenue and a profit of $3.85 a share when it reports on Tuesday morning.
Contact Angela at angela@proactiveinvestors.com
Follow her on Twitter @AHarmantas