Both The Home Depot and Walmart reported cautious outlooks for 2023 in the face of continued uncertainty following a year of high inflation. Additionally, Home Depot announced that it will invest $1 billion in compensation for its frontline associates, including improvements to pay, training and career development opportunities.
The Home Depot’s Q4 2022 results disappointed, with a mild sales increase of 0.3% to $35.8 billion, up $112 million from Q4 2021. Comparable sales for the period fell 0.3% year-over-year, while net earnings were flat at $3.4 billion. Total customer transactions dropped 6% compared with the year-ago period, but the average ticket cost was up 5.8% to $90.05.
Results for fiscal 2022, which ended Jan. 30, as a whole were brighter, with overall sales up 4.1% to $6.2 billion. Comparable sales were up 3.1% for the year globally and 2.9% in the U.S., while net earnings were up to $17.1 billion in fiscal 2022 compared to $16.4 billion in fiscal 2021.
“Fiscal 2022 was another record year for The Home Depot as our team continued to successfully execute in a challenging and dynamic environment,” said Ted Decker, President and CEO of Home Depot in a statement. “Our ability to deliver growth on top of the $40 billion of sales growth achieved over the prior two-year period, while navigating persistent inflation, ongoing global supply chain disruptions and a tight labor market, is a testament to investments we have made in the business, as well as our associates’ relentless focus on our customers.”
The Home Depot expects both sales growth and comparable sales growth to remain flat compared to fiscal 2022 while its operating margin rate grows to 14.5% due to investments in workers. This, along with its mediocre Q4 results, resulted in share prices falling 13.6% year-over-year as of Feb. 21.
Walmart Stands Strong, but 2023 Remains Uncertain
In comparison, Walmart delivered a strong Q4, with total revenue up 7.3%, comparable sales up 8.3% and ecommerce sales up 17%. Sam’s Club’s comparable sales rose 12.2% for the period and membership was up 7.1%, reaching a new all-time high.
Walmart achieved total revenue of $611.3 billion for fiscal 2023, which ended on January 31, up 6.7% from fiscal 2022. Comparable sales were up 6.6% from the previous year and ecommerce was up 12%. Sam’s Club comparable sales grew 10.5% and membership income rose 8.6%.
The retailer forecast earnings of $5.90 to $6.05 per share through January 2024. The retailer noted that higher consumer prices alongside rising rents could cause the Federal Reserve to lift borrowing costs with additional interest rate hikes, which could result in an economic downturn during the second half of 2023.
“There’s still a lot of trepidation and uncertainty with the economic outlook,” said John David Rainey, CFO at Walmart in an interview with Reuters. “Balance sheets are continuing to get thinner, savings rate is roughly half of what it was at a pre-pandemic level and we’ve not been in a situation like this where the Fed is raising at the rate that it does.”