Home Depot provides downbeat outlook, shares slide

Home Depot Inc. (NYSE:HD) shares declined as the retailer slashed its outlook and expectations for annual sales. The stock pared earlier losses but remained in negative territory. The home improvement retailer forecasts sales to decline by a staggering 2% to 5% in fiscal 2023 as demand eases for renovation projects and accompanying goods.

Ahead of a week chock full of earnings reports from retailers, Home Depot posted a revenue miss which points to weak demand and comparable sales that also missed estimates. Among the factors cited were inclement weather in California in the latest quarter, alongside lumber deflation, and “broad-based pressure across the business” compared to Q4 2022 – according to Home Depot CEO and President, Ted Decker.

Retailer companies reporting quarterly earnings this week, include Target Corp. (NYSE:TGT), TJX Cos. (NYSE:TJX), Walmart Inc. (NYSE: WMT), and Foot Locker Inc. (NYSE: FL). Discretionary spending headwinds could rear their ugly head in upcoming results from U.S. retailers as consumers adjust their spending and tighten household budgets.

Video transcript

RACHELLE AKUFFO: Softening consumer demand taking a toll on Home Depot's outlook for the fiscal year. Here with more on the latest market action in retail we have Yahoo Finance contributor Remy Blaire. Remy there on the floor of the New York Stock Exchange. What's going on?

REMY BLAIRE: Well, US equity markets remain mostly lower this morning. We are seeing the Dow Jones Industrial Average as well as the S&P lower and the NASDAQ trading on both sides of flat this morning.

And, of course, Home Depot's shares are in the spotlight today following its latest earnings report, and shares do remain in negative territory. Earlier, the retail slashed its outlook and also said that it expects annual sales for the home-improvement retailer to fall as consumers cut spending and as demand for home renovations and home-improvement goods pull back.

Meanwhile, taking a closer look at the details out from the earnings report, Home Depot does expect sales to decline by 2% to 5% in fiscal 2023, and that is a considerable pullback considering that earlier this year the retailer said that it expect to see flat sales.

Meanwhile, first-quarter revenue missed analysts' forecasts as well with revenue down by 4.2% at $37.26 billion. This is the biggest revenue miss since November 2002.

At the same time, comp sales fell by 4 and 1/2% for the retailer, much more than expected. At the same time, Q1 profit did come in above estimates at $3.87 billion.

And this week we will be getting more earnings out from the retail sector. We have Target as well as TJX Companies, Walmart, as well as Foot Locker at the end of this week. Keep in mind that we've got US retail sales for the latest month, which did show an increase of 0.4%, but that was half than the gain expected.

And ahead of the reports, some analysts expect to see headwinds that are weighing on discretionary spending as US consumers continue to adjust shopping habits as well as tighten household budgets.

RACHELLE AKUFFO: All right, thank you for that. Obviously Home Depot an economic bellwether there sending some jitters through the markets today. Big thank you there, Remy Blaire.