Published - February 21, 2023 @ 4:38 PM (EET)

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Shares of Home Depot (NYSE:HD) dipped more than 4% in premarket trading Tuesday as a miss on revenue expectations and cautious full-year guidance overshadowed a dividend increase.

With demand for home improvement products dwindling due to soaring inflation, the retailer posted revenue of $35.83 billion compared with the $35.97 billion Wall Street expected, making it the first time since November 2019 that Home Depot missed estimates.

In the quarter that ended Jan. 29, Home Depot reported sales of $35.83 billion, up 0.3% from the year-ago period. However, comparable sales fell 0.3%, compared with analysts average estimate of a 0.56% increase. US comparable sales declined 0.3%, better than the expected decline of 0.9%.

EARNINGS REPORT

The retailer attributed the sales falling short of estimates mainly to a drop in lumber costs due to a nationwide shortage in fiscal 2021. Meanwhile, Home Depot expects sales and comparable sales to be flat.

More positively, merchandise inventories came in at $24.89 billion, better than the estimated $25.53 billion. Chair, president, and CEO Ted Decker said, "fiscal 2022 was another record year for The Home Depot as our team continued to successfully execute in a challenging and dynamic environment." 

Overall, the company saw $157.4 billion in sales in fiscal 2022, up 4.1% from the year-ago period, and $17.1 billion in profits, a little over the $16.4 billion reported last year. The home improvement retailer held $2.8 billion in cash and equivalents for the quarter, with net cash provided by operating activities for the year totaling $14.62 billion.

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Despite taking cost control measures, Home Depot sees elevated costs across its supply chain. At the same time, a tight US labor market has prompted it to invest more in employee wages and benefits.
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With retailers and restaurants competing for workers, Home Depot announced it would spend an additional $1 billion to give its hourly employees a raise. Though the company did not disclose the new average wage during the fourth-quarter earnings report, it said every market's starting wage is at least $15 an hour.

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In addition, board directors approved a 10% increase in its quarterly dividend to $2.09 per share, equating to an annual dividend of $8.36 per share.
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