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Home improvement retailer Home Depot Inc. (NYSE: HD ) and Lowe’s Companies Inc. (NYSE: LOW) recently reported its earnings results for the fourth quarter of 2022. Both companies saw sales fall short of expectations and both have predicted a decline in the home improvement market in the near term. Here’s how the two rivals fared in the most recent quarter:
Quarterly performance
In the fourth quarter of 2022, Home Depot posted sales of $35.8 billion, which was unchanged from the $35.7 billion reported in the same period last year. Comparable sales fell 0.3% in the quarter. EPS rose 3% year over year to $3.30.
Lowe’s sales in Q4 2022 rose 5% year-over-year to $22.4 billion but were lower than expected. Comparable sales were down 1.5%. Adjusted EPS rose 28% YoY to $2.28.
Category performance
During the fourth quarter, Home Depot’s average comp ticket grew 5.8%, driven by inflation across product categories and demand for new products. Comp transactions fell 6%. Average Lowe’s comp tickets rose 4.8%, driven by product inflation and higher Pro sales, but offset by a 5.5% decline in comp transactions.
Both Home Depot and Lowe’s saw strength in the Pro customer category during Q4. Home Depot’s Pro sales growth outpaced DIY in Q4 while Lowe’s witnessed strong sales in Pro as well as strong demand in DIY in its core home improvement category. Both companies say their Pro customers have a healthy backlog. Home Depot and Lowe’s saw positive comps in categories like building materials, plumbing and manufacturing in the fourth quarter.
Market trends and prospects
Home Depot and Lowe’s both forecast a decline in the home improvement market in 2023, but both remain optimistic about the long-term outlook for the industry.
Home Depot expects real economic growth and flat consumer spending in 2023. The company sees normal transactions as consumers shift spending to services from goods and believes the home improvement market will decline by single digits if this shift persists. at the current pace. Home Depot expects moderate demand for home improvement in 2023, but believes market fundamentals remain strong for the long term.
Lowe’s sees positive trends in disposable personal income, house price appreciation and the aging of the housing stock, which are key drivers of the business. Factors like remote work and the formation of millennial households are also tailwinds. Consumers are choosing to upgrade their existing homes to meet their changing needs. All these factors give confidence in the long-term prospects of the industry.
Lowe’s believes that housing investment will come under pressure in 2023 and due to high inflation, high interest rates and consumer caution, forecasts a slight decline in the home improvement market.
Home Depot expects sales growth and comparable sales growth of approx. flat in FY2023 compared to FY2022. EPS is expected to fall in the mid-digits. Lowe’s expects total sales of approx. $88-90 billion in FY2023. Comparable sales are expected to decline by 2% compared to last year. EPS is estimated at $13.60-14.00.
Home Depot’s stock has fallen 8% over the past 12 months while Lowe’s shares are down 11%.
Click here to read the full transcript of the Home Depot and Lowe’s Q4 2022 earnings conference call
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