Home Depot Sees More Cautious Consumer, Narrows Sales Forecast

Home Depot expects customers to be more careful with their spending in the coming months.

The home improvement retailer forecasts annual sales to fall 3% to 4% from 2022. Previously, the company's expectation was for a drop of 2% to 5%.

Chief Financial Officer Richard McPhail said in an interview with CNBC that the company's results in the fiscal third quarter and updated forecast reflect that the year is a period of moderation in home improvement, when customers are downscaling projects.

Home Depot ended the quarter with a drop of 3% in sales from a year earlier to $37.7 billion. Profit fell 12% to $3.81 per share. The results beat analysts' estimates of $37.6 billion for sales and $3.76 profit per share, CNBC said, citing LSEG data.

"We saw continued customer engagement with smaller projects, and experienced pressure in certain big-ticket, discretionary categories," Chief Executive Officer Ted Decker said in the earnings statement.

The home improvement sector feels some impact of the drop in home sales in the U.S., as spending in moving and renovations falls. At the same time, some customers, who have their mortgages locked in low fixed rates, are choosing to spruce up their homes, CFO McPhail told CNBC, adding that it's hard to quantify the balance.

Home Depot is one of the biggest retailers to release quarterly earnings this week. Target reports Wednesday, followed by Walmart, Macy's and The Gap on Thursday.