The Home Depot Bets on Pros Amid Predictions of Flat Sales Growth

For the first time since 2019, The Home Depot’s revenue fell short of Wall Street’s predictions amid a general softening in the home improvement market.

On Tuesday, The Home Depot posted fourth-quarter earnings that beat expectations, but the big box giant still missed on revenue. Officials also projected roughly flat sales growth in 2023. 

"We expect this to be a year of moderation in demand for home improvement," said CEO Ted Decker during the fourth-quarter 2022 earnings call on February 21.

The company has benefited from strong sales growth due to inflation and Covid-fueled spending on remodeling. But many of today’s consumers are spending more on travel and/or conserving resources to combat the toll inflation is taking on their personal finances, said company officials.

Also notable, The Home Depot’s recently increased its investment in employees. A tight labor market spurred the company to earmark $1 billion in wage increases for hourly workers which brought the average starting salary to $15 an hour, beginning in early February.

Betting on the Pro Market

Pros represent about 10% of Home Depot customers, but account for approximately half of all its business. Pro sales growth outpaced DIY during Q4, but officials cautioned that this is likely due to contractors still working through their backlogs, and that picture could change. 

“The highlight remains the high pro spend,” Decker said on the call. “I mean that is still the strongest piece of the business.”

Over the past few years, the big box giant has invested heavily in pro customers, and recently expanded its Pro Xtra loyalty program adding new benefits and membership tiers.