Home Depot stock slides on Q4 earnings miss

Yahoo Finance Live anchors Julie Hyman and Brad Smith discuss the decline in stock for Home Depot following fourth-quarter earnings.

Video transcript

JULIE HYMAN: Well, Home Depot's revenue missed expectations for the fourth quarter as the home-improvement giant reported mixed earnings. Also issued as well some weak guidance for the fiscal year as Home Depot expects sales growth to be approximately flat compared to fiscal 2022. Those shares are down by about 4%.

The key thing coming out of Home Depot here is an increase in pay for its associates. The company is now saying that it's going to have a billion dollars in annual-- additional annual compensation for front-line hourly associates this year. That's going to squeeze its margin this year to about 14.5%.

So really interesting here that at the same time that the company is looking for sales growth to slow, it's paying its people more. So that's a tricky combo.

BRAD SMITH: Paying its people more and paying its investors more too. They increased the dividend by about 10%. That's something also similarly within this kind of retail story here on the morning that you heard from Walmart, and it seems that the dividend-- locking that in for investors for Home Depot, at least right now, might be a way to just continue to try and maintain some of that confidence, even if you do see some of the waning demand, whether that be derivative of what they're seeing in the housing market right now or the number of people that are just taking on some of these DIY projects.

Perhaps as of this point in time for Home Depot, really making sure that the front-line associate, $1 billion in annualized compensation increase and investment that they're mentioning plus the investment in the investors in the form of that dividend increase-- we should note, a dividend increase does not necessarily signal a healthy company all of the time. However, it does signal that there is some balance-sheet strength that they can deploy, even when times look a little bit more murky. So perhaps that's what they're trying to tap in.

JULIE HYMAN: Well, and also sometimes it's a message to investors, right?

BRAD SMITH: Right.

JULIE HYMAN: It's saying this is the investment we're making right now. We know times are a little bit tough. Here's a little something extra to stick around. And so that seems to be at least partially the case.

We do want to mention, as we talk about Home Depot, two other things. Lowe's is falling-- and that company is set to report as well-- because obviously people extrapolate to Home Depot. And secondly, we're going to be talking about existing home sales. That number coming out for January at the top of the next hour. So we're going to be bringing you that. Existing home sales economists, predicting they rose 2% in January. And, of course, you have a relationship there as well between these home-improvement retailers and what's happening in the housing market.