Home improvement merchant The Home Depot Inc. is preparing for a slowdown in demand this year. Inflation, coupled with a slowing housing market, continues to impact consumer spending habits, Jeff Kinnaird, executive vice president of merchandising, told investors during the company’s fiscal fourth quarter 2022 earnings call.

As the broader economy shifts from goods back into services, “it is our assumption regarding consumer spending … that we will see flat real economic growth and consumer spending in 2023,” Kinnaird said.

The merchant reported revenue of $35.83 billion for the fiscal three months ended Jan. 29, 2023. That’s up 0.3% from $35.71 billion year over year.

Revenue for the 2022 fiscal year ended Jan. 29, 2023, was $157.40 billion. That compares with $151.15 billion a year ago, a 4.1% increase.

Home Depot sales, Q4 earnings 2022

Home Depot reported online sales grew 4.0% compared to a year ago for the fiscal fourth quarter ended Jan. 29. That’s down from 10.0% growth for the merchant’s fiscal third quarter ended Oct. 30, 2022.

Net sales increased to $35.83 billion. That’s a modest 0.3% increase from $35.71 billion for the comparable period a year earlier. Net earnings increased to $3.36 billion. That’s up 0.3% from $3.35 billion for the year-ago period.

Additionally, Home Depot fulfilled 45% of online orders through its stores. That’s down from 50% in Q3 2022.

Home Depot fiscal year 2022

For the 12 months ending Jan. 29, Home Depot net sales rose to $157.40 billion. That’s up 4.1% from $151.15 billion a year earlier. Net earnings for the period were $17.10 billion. That’s up 4.1% from $16.43 billion for the year-ago period.

Home Depot omnichannel strategy

The home improvement merchant also talked about its investment in “HD” phones. In-store sales associates use the machine learning-powered devices to access inventory supply in real time, said Ann-Marie Campbell, executive vice president of U.S. stores and international operations, during the call.

Campbell said the merchant increased the number of managers on the shop floor to free up other store associates. This will allow them to concentrate on associate training and development.

Home Depot’s investment in its supply chain includes its approximate 150 facilities designed to ship small orders as well as facilities that only stock and deliver big and bulky products, Angie Brown, senior vice president of technology, told Digital Commerce 360.

Brown says the merchant is also focused on helping customers easily find what they need online.

“We continue to update [homedepot.com’s] search to handle the demands of the different shopping patterns we see from our customers as they engage with us online,” Brown says.

Going forward, Edward Jones analyst Brian Yarbrough expects Home Depot to continue its focus on improving delivery times to ensure a positive customer experience.

He says the 5% drop in online orders fulfilled in store is “really significant compared to last quarter.”

“If the trend continues to move lower, then there could be a few negatives associated with that,” he says.

According to Yarbrough, it could cost Home Depot more to ship items to customer homes versus picking up in store.

“It also eliminates the potential for a customer to purchase other items when they enter the store to pick up items ordered online,” he says.

“It could signal that more of the business is susceptible to competition from online-only retailers,” he says.

Spending $1 billion to increase wages

The merchant will spend $1 billion to increase employee wages for its frontline hourly associates.

“While we expect this to be a year of moderation in demand for home improvement, we believe that the long term underpinnings of our market remains strong,” Ted Decker, chair, president and CEO, told investors. “[This allows] us not only to attract the most qualified talent [but] also retain the exceptional associates base that is already in place.”

Home Depot ranks No. 4 in the 2022 Digital Commerce 360 Top 1000 database.

Home Depot earnings

For the fiscal quarter ended Jan. 29, Home Depot reported:

• Online sales grew 4% compared to a year ago.
• Net sales increased to $35.83 billion, a modest increase of 0.3% from $35.71 billion for the comparable period a year earlier.
• Profit grew to $3.36 billion. That’s up 0.3% from $3.35 billion for the year-ago period.

For the fiscal year ended Jan. 29, Home Depot reported:

• Net sales rose to $157.40 billion. That’s up 4.1% from $151.15 billion a year earlier.
• Profit for the period was $17.10 billion. That’s up 4.1% from $16.43 billion for the year-ago period.

Percentage changes may not align exactly with dollar figures due to rounding.

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