By Deborah Mary Sophia and Granth Vanaik
(Reuters) -Home Depot forecast full-year results below analysts' estimates on Tuesday, signaling that lackluster demand would continue to pressure the company this year as people tighten spending on home remodeling amid sticky inflation.
With food prices and borrowing costs still elevated, customers are limiting home-related spend to just essential repair and maintenance rather than undertaking larger renovations.
Foot traffic at the No. 1 U.S. home improvement chain fell in the fourth quarter, with declines worsening toward January due to harsh winter weather, Placer.ai data showed.
"The home improvement market still faces headwinds ... we are planning for a year of continued moderation but with slightly less pressure to (sales) than what we faced in fiscal 2023," Home Depot (NYSE:HD) CFO Richard McPhail said.
The back half of 2024 would be "marginally stronger," CEO Ted Decker said.
Home Depot expects 2024 comparable sales to decline about 1%, while analysts estimate a 0.06% rise, LSEG data showed. The company's shares fell about 1%.
"I'm not overly alarmed by the guidance ... the timing of (recovery) is the big question mark," said Sarah Henry, managing director and portfolio manager at Logan Capital Management.
Still, the consumer backdrop appeared strong, Henry added. Retail bellwether Walmart (NYSE:WMT) issued an upbeat annual sales forecast.
Fourth-quarter transactions at Home Depot fell 1.7%, logging their eleventh straight quarterly decline, while comparable sales dropped a bigger-than-expected 3.5%.
"There was an expectation ... that the company could return to growth sooner than they're guiding to," said Jonathan Reid, a director at Fitch Ratings.
Home Depot forecast 2024 per-share earnings to grow about 1%, below expectations of a 3.62% rise.
Shares of Lowe's (NYSE:LOW), which reports results next week, also dropped 1.5%.
"I wouldn't say it (the forecast) is a big red flag ... it's a little yellow flag," D.A. Davidson analyst Michael Baker said.