Shoppers Are Still Abandoning Home Depot, New Data Shows—Here's Why
Sales took another hit during the last quarter, but executives remain hopeful for 2024.
Unless you're partial to your local hardware store, odds are you head to well-known retailers like Lowe's or Home Depot when starting a new project. These stores are big operations, offering a wide variety of products and services to check off items on both your shopping and to-do lists. However, in recent years, customers have been frequenting these retailers less and less, according to company data. Read on to find out why shoppers are still abandoning Home Depot.
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Sales and income were both down during the last fiscal quarter.
On Feb. 20, Home Depot reported results from the fourth quarter of 2023. Sales totaled $34.8 billion, representing a 2.9 percent decrease from the same time in 2022. Net income in the fourth quarter also fell to $2.8 billion from $3.36 billion during the same quarter last year.
In addition, the average ticket cost and customer transactions declined in the fourth quarter when compared with the same period in 2022, dropping by 1.3 percent and 2.1 percent, respectively.
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A few different factors impacted sales.
During a Feb. 20 earnings call, Ted Decker, chair, president, and CEO of Home Depot, said that 2023 results were "largely in line with our expectations," but attributed some of Home Depot's struggles to excess inventory.
Home Depot's chief financial officer Richard McPhail elaborated on the situation in a conversation with CNBC, pointing out that demand slowed in 2023, with customers returning to more normal spending habits. He also cited rising interest rates as a pain point: As CNBC reported, some consumers aren't buying new homes due to these higher rates.
At the same time, consumers aren't investing in their current homes either. According to McPhail, they're pressing pause on bigger projects and those that require loans, due to the high costs of borrowing.
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It's not all bad news.
While sales were a bit disheartening, Home Depot did beat Wall Street's earning and revenue expectations, CNBC reported. Earnings per share were forecast to reach $2.77, but ended up at $2.82. Similarly, revenue was predicted to reach $34.64 billion, but ended up totaling $34.79 billion. And in general, executives are optimistic about Home Depot's future.
"Our market is on its way back to normal demand conditions," McPhail told CNBC. "We're not quite there yet, but the pressures we saw in 2023 are receding."
Illustrating this, Home Depot is hoping for a 1 percent increase in sales during fiscal 2024, compared with a 1.6 percent increase anticipated by Wall Street, CNBC reported.
In general, 2023 was a tough year for Home Depot.
Overall in 2023, Home Depot's sales totaled $152.7 billion, which was a decrease of 3 percent from 2022, according to the Feb. 20 press release—and the latest results follow several quarters of declining sales.
Decker labeled 2023 "a year of moderation," considering the previous surge in demand during the COVID-19 pandemic. At that time, people had more money to spend on renovating their homes.
He added, "During fiscal 2023, we focused on several initiatives to strengthen the business while also staying true to our strategic investments of creating the best interconnected experience, growing our pro wallet share through our unique ecosystem of capabilities, and building new stores. We remain excited about the future for home improvement and our ability to grow share in our large and fragmented market, which we estimate to be over $950 billion."
