Home Depot Falls as U.S. Home-Price Gains Start to Lose Steam

(Bloomberg) -- Home Depot Inc. shares fell on Tuesday after the retailer said sales gains will start to cool off this year -- mirroring a trend in the U.S. housing market.

Fourth-quarter sales also fell shy of analysts’ average estimate -- a rare occurrence for the home improvement chain. The performance was hindered by cold, snowy weather, Chief Executive Officer Craig Menear said on a conference call.

“Investors were fearful of the sales miss,” said Seema Shah, an analyst for Bloomberg Intelligence. Home Depot rarely misses guidance, so that “was a little bit shocking.”

Home Depot Falls as U.S. Home-Price Gains Start to Lose Steam

Home Depot has been buoyed for years by rising housing prices in the U.S. -- homeowners are more likely to invest in improvements if they feel it will boost their home’s value. But there are signs that the market is cooling: Prices in 20 U.S. cities rose in December at the slowest pace in four years, according to the S&P CoreLogic Case-Shiller index of property values. If the trend continues, it could sap some energy from the Atlanta-based retailer.

The company’s shares fell as much as 3.7 percent to $182.92 in New York -- the most since October. The stock had gained 11 percent this year through Monday’s close, in line with the S&P 500 Index.

Fourth-quarter earnings per share were $2.09, short of analysts’ average estimate of $2.16. Same-store sales -- a key gauge of a retailer’s success -- rose 3.2 percent, trailing the estimate of 4.5 percent from Consensus Metrix. Excluding the impact from weather, sales met expectations, Menear said.

Sales Growth

Home Depot sees comparable-store sales growing 5 percent this year -- just short of 2018’s rate of 5.2 percent. That rate would be the weakest since 2012. Even so, Shah said it was a “bullish” forecast and noted that the fourth quarter is not as meaningful as the spring selling season the company is about to enter.

Home Depot Falls as U.S. Home-Price Gains Start to Lose Steam

The company took steps to bolster the stock, including an increase to its quarterly dividend by 32 percent, and a $15 billion stock buyback program, with about $5 billion in repurchases for the current fiscal year.

Home Depot joined a host of other U.S. retailers that posted disappointing sales recently. The results came amid a historic cold snap in the U.S., where it generates more than 90 percent of its sales, and a shutdown of the federal government.

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