Home Depot (HD) results for the fourth quarter of 2022

A customer loads plywood onto a truck outside a Home Depot store in Galveston, Texas, Tuesday, Aug. 25, 2020.

Scott Dalton | Bloomberg | Getty Images

Home Depot’s revenue fell short of Wall Street estimates in its fourth-quarter financial report on Tuesday.

The company also gave a subdued outlook for the next year amid a tough consumer backdrop.

Here’s what the company posted, compared to what Wall Street expected, based on a survey of analysts by Refinitiv:

• Earnings per share: $3.30 vs. $3.28 expected
• Revenue: $35.83 billion vs. $35.97 billion expected

It’s the first time Home Depot has missed Wall Street’s earnings expectations since November 2019, before the Covid pandemic. Shares in the company fell 4 percent.

In the quarter ended Jan. 29, Home Depot reported $35.83 billion in sales, up 0.3% from the same period last year, which generated $35.72 billion in revenue. The retailer’s reported net income of $3.36 billion was also 0.3% higher than a year earlier, which was $3.35 billion, or $3.21 per share.

Amid record inflation levels, a shift in consumer behavior and a slowdown in the housing market, the home improvement retailer has repeatedly beaten the Street’s expectations over the past year, but fell slightly short of sales estimates.

The company attributed that solely to a drop in lumber costs, which had increased in price due to nationwide shortages in fiscal 2021. The decline in lumber negatively impacted comparable sales by 0.7%, the company said.

Home Depot said it expects sales and comparable sales to be roughly flat for the new fiscal year. They estimate an operating margin of about 14.5%, which is impacted by a $1 billion investment Home Depot is making in wage growth.

Home Depot expects a mid-single-digit percentage decline in diluted earnings per share.

The retailer’s chief financial officer, Richard McPhail, told CNBC that Home Depot gave a subdued outlook because it expects some pressure in the goods sector and flat consumer spending.

“So we’re working from a kind of basic assumption that consumer spending will be flat. We know that our market has seen a gradual shift that reflects the broader shift in the economy, in consumer spending from goods to services,” McPhail said.

“During Covid we saw a shift to goods. Over the last almost two years we’ve seen a gradual shift back from goods to services and we think our market has reflected that and we think this dynamic could put some pressure on our market.”

These days, shoppers are using their discretionary dollars for experiences and travel as many burn through their savings amid constant inflation.

Still, McPhail insisted that investments the company has made position them to “take share in any environment” and they are confident they will overcome any market pressure.

While the housing market has been relatively stagnant after a red-hot 2021, the dealer believes that high mortgage rates could be beneficial to results.

“When mortgage rates go up, we see kind of an interesting dynamic in homeowners who are happy with their fixed-rate mortgage and then decide to upgrade in place,” McPhail said.

“You just don’t have as many willing sellers in the market today … that drives the tendency to improve in place.”

The company will host an earnings call with investors at 9 a.m. ET.

Read the full results report here.