ATLANTA -- The Home Depot posted strong profits in its final quarter of 2022 but said it expects profits to slip this year, sending shares of the home improvement retailer skidding Tuesday.
Earnings per share will probably decline by a mid-single-digit percentage, Home Depot said. Sales growth is expected to be flat in the year through January 2024.
"We still see a healthy customer, we have job growth, growing wages, still-strong balance sheets," Chief Executive Officer Ted Decker said on a call with analysts. "But we do see a unique environment with many cross-currents right now. Given all that, we do expect moderation in home improvement demand."
Home Depot has excelled over the past several years with so many people at home, or searching for a new home in a pandemic. That boom has eased for a number of reasons and Americans are spending more on services outside the home now, diminishing the number of filled shopping carts in recent years at Home Depot.
The Atlanta company had a fourth-quarter profit of $3.36 billion, or $3.30 per share, which is 3 cents better than Wall Street had expected, according to a survey of analysts by Zacks Investment Research.
Quarterly revenue of $35.83 billion was just shy of forecasts, but the focus was on the retailer's expectations for 2023.
Home Depot's expectation for slower growth caught industry analysts off guard. Wall Street was also projecting a slight uptick in sales.
The company also said Tuesday that it would spend $1 billion on wage increases for its U.S. and Canadian hourly workers, starting this month.
Starting pay will be at least $15 per hour in all markets.
Home Depot posted huge numbers during the pandemic as millions stuck at home either reworked the space where they lived, or found more spacious accommodations. All of that put the world's largest home improvement retailer in high demand, both for home owners, and on Wall Street.
The global economy, however, has been distorted as it tries to put the pandemic behind it, with inflation elevated everywhere and the booming housing market cooling down, partly because of actions taken by the Federal Reserve to cool inflation, namely raising interest rates.
U.S. home sales tumbled to the slowest pace in nearly a decade as soaring mortgage rates and sky high prices in 2022 pushed homeownership out of reach for many Americans.
"After a year of defying gravity, the slowing economy and pressures on consumers have finally caught up with Home Depot," said Neil Saunders, managing director of GlobalData. "To be fair, the final quarter results are not terrible -- especially as they come off the back of a long period of extremely good growth -- but they nevertheless represent a material slowdown and are the worst quarterly performance in two years."
The company also said it would increase its quarterly dividend by 10%, to $2.09, for an annual dividend of $8.36 per share.
Information for this article was contributed by The Associated Press and by Olivia Rockeman and Tonya Garcia of Bloomberg News (WPNS).