Raphael Stevens

Home Depot missed Wall Street’s revenue expectations for the first time since November 2019.
The home improvement retailer provided a muted outlook for fiscal 2023 and expects sales growth to be approximately flat.
The company attributed the flat outlook to a tougher consumer backdrop and a pivot away from goods towards services.

A customer loads plywood to a truck outside a Home Depot store in Galveston, Texas, on Tuesday, Aug. 25, 2020.
Scott Dalton | Bloomberg | Getty Images

Home Depot’s revenue fell short of Wall Street’s estimates in its fiscal fourth-quarter earnings report Tuesday.
The company also provided a muted outlook for the next year amid a tough consumer backdrop.

Here’s what the company posted, compared to what Wall Street was anticipating, based on a survey of analysts by Refinitiv:

Earnings per share: $3.30 vs. $3.28 expected
Revenue: $35.83 billion vs. $35.97 billion expected

It’s the first time Home Depot missed Wall Street’s revenue expectations since November 2019, before the Covid pandemic. Shares of the company fell 4% in pre-market trading.
In the quarter ended Jan. 29, Home Depot reported $35.83 billion in sales, up 0.3% from the year ago period, which saw $35.72 billion in revenue. The retailer’s reported net income of $3.36 billion was also 0.3% higher than the year ago period, which was $3.35 billion, or $3.21 per share.
Amid record levels of inflation, a shift in consumer behavior and a housing market slowdown, the home improvement retailer has repeatedly beat the Street’s expectations over the last year but fell a bit short in sales estimates.
The company attributed that solely to a drop in lumber costs, which had surged in price due to nationwide shortages in fiscal 2021. The drop in lumber negatively impacted comparable sales by 0.7%, the company said. 

“But for that we would have been right in line with our expectations,” Home Depot CFO Richard McPhail told CNBC.
“After two years of high volatility, we’ve seen a little more stability in recent weeks and months, but it’s hard to predict lumber prices.”
Home Depot said it expects sales and comparable sales to be approximately flat for the new fiscal year. They project an operating margin rate of about 14.5%, which is impacted by a $1 billion investment Home Depot is making in wage growth. 
Home Depot expects a mid-single digit percent decline in diluted earnings-per-share.
The retailer issued the muted outlook because it expects some pressure in the goods sector and flat consumer spending, McPhail said.
“So we work from kind of a fundamental assumption that consumer spending will be flat. We know that our market has seen a gradual shift that reflects the broader shift in the economy, in consumer spending from goods to services,” he said.
“During Covid, we saw a shift into goods. Over the last really almost two years, we’ve seen a gradual shift back away from goods into services and we think our market has reflected that and we think that that dynamic could put some pressure on our market.”
These days, shoppers are using their discretionary dollars towards experiences and travel as many burn through their savings amid consistent inflation.
Still, McPhail insisted investments the company has made positions them to “take share in any environment” and they’re confident they’ll overcome any market pressures.

Pressure catches up to Home Depot

Total customer transactions dropped 6% in the quarter compared to the year ago period but the average ticket cost – $90.05 – was up 5.8%.
“After a year of defying gravity, the slowing economy and pressures on consumers have finally caught up with Home Depot,” Neil Saunders, the managing director of GlobalData, said in a statement.
“To be fair, the final quarter results are not terrible – especially as they come off the back of a long period of extremely good growth – but they nevertheless represent a material slowdown and are the worst quarterly performance in two years.”
Saunders said Home Depot’s earnings reflect a slowdown in the housing market, which is a key driver of spend for the home improvement sector.
“Unfortunately for Home Depot, the dip in the housing market also coincided with a fall in the number of people undertaking DIY,” said Saunders.
“Our data show that the number of improvement projects done by consumers fell over the prior year as people conserved cash for other activities over the holiday period.”
Still, despite a relatively stagnant housing market following a red-hot 2021, the retailer thinks high mortgage rates could prove beneficial for its results.
“As mortgage rates increase, we see a kind of an interesting dynamic in homeowners who are happy with their fixed rate mortgage and then decided to improve in place,” said McPhail.
“You just don’t have very many willing sellers in the market today… that is driving the tendency to improve in place.”
Overall, the company saw $157.4 billion in sales in fiscal 2022, up 4.1% from fiscal 2021, and $17.1 billion in profits, a small jump from the $16.4 billion reported last year.
The company will host an earnings call with investors at 9 a.m. ET.
Read the full earnings release here.

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Home Depot said it will spend an additional $1 billion to raise hourly employees’ wages.
The home improvement retailer is the latest to signal that the labor market is still tight.
Walmart, the nation’s largest private employer, recently announced it would raise its minimum wage to $14 an hour for store employees.

A customer enters a Home Depot store on August 16, 2022 in San Rafael, California.
Justin Sullivan | Getty Images

Home Depot on Tuesday said it will spend an additional $1 billion to give its hourly employees a raise, as retailers and restaurants compete for workers.
The home improvement retailer announced the wage investment as it reported fourth-quarter earnings. It did not disclose the new average wage for employees, but said every market’s starting wage is at least $15 an hour.

Hourly workers will see the increase, which went into effect on Feb. 6, this month in their paychecks. The increase will boost pay for all hourly workers in the U.S. and Canada.
With the move, Home Depot becomes the latest major retailer to signal that the labor market is still tight — especially when it comes to lower-wage hourly workers. Across the jobs market, the data is still strong: The unemployment rate fell to 3.5% in and nonfarm payroll growth was better than expected in December, the most recently available data from the U.S. Bureau of Labor Statistics.
Several big-name tech companies and banks, including Google, Amazon and Goldman Sachs, have laid off thousands of employees. So far, however, retailers, restaurants and the hospitality industry has largely bucked the trend — and even announced plans to hire or boost pay.
Walmart, the nation’s largest private employer, recently announced it would raise its minimum wage to $14 an hour for store employees and have an an average U.S. hourly wage of more than $17.50, as of early March. Chipotle Mexican Grill said it wants to hire 15,000 restaurant workers ahead of its busy spring season.
The companies have made those plans, despite industry-watchers’ expectations for slower sales growth in the year ahead. Companies have cited labor costs among the things driving up their budgets. But they also feel pressure to increase pay as prices rise for groceries, rent and other essentials.

Home Depot is one of the country’s largest private employers with about 475,000 workers. The vast majority of its employees are hourly workers at its approximately 2,300 stores in the U.S., Canada and Mexico. Its frontline employees, who will receive the wage increases, also work in supply chain, customer care and merchandising roles.
In an email to employees that was shared with CNBC, Home Depot CEO Ted Decker said the investment “positions us more favorably in every market where we operate.” He said higher wages will improve the customer experience as the company attracts more high-quality workers and keep experienced staff.
“This investment will help us attract and retain the best talent into our pipeline,” he said.
Home Depot has added more training opportunities, too, he said, including the promotion of more than 65,000 employees in 2022 alone.

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Layoffs have recently expanded beyond tech giants like Microsoft and Amazon.
Service industries such as hospitality and restaurants have been hiring to rebuild after the pandemic.
The Fed has been closely watching job and wage growth as it seeks to tame inflation.

A sign for hire is posted on the window of a Chipotle restaurant in New York, April 29, 2022.
Shannon Stapleton | Reuters

Job cuts are rising at some of the biggest U.S. companies, but others are still scrambling to hire workers, the result of wild swings in consumer priorities since the Covid pandemic began three years ago.
Tech giants Meta, Amazon and Microsoft, along with companies ranging from Disney to Zoom, have announced job cuts over the past few weeks. In total, U.S.-based employers cut nearly 103,000 jobs in January, the most since September 2020, according to a report released earlier this month from outplacement firm Challenger, Gray & Christmas.

Meanwhile, employers added 517,000 jobs last month, nearly three times the number analysts expected. This points to a labor market that’s still tight, particularly in service sectors that were hit hard earlier in the pandemic, such as restaurants and hotels.
The dynamic is making it even harder to predict the path of the U.S. economy. Consumer spending has remained robust and surprised some economists, despite headwinds such as higher interest rates and persistent inflation.
All of it is part of the Covid pandemic’s “legacy of weirdness,” said David Kelly, global chief strategist at J.P. Morgan Asset Management.
The Bureau of Labor Statistics is scheduled to release its next nonfarm payroll on March 3.
Some analysts and economists warn that weakness in some sectors, strains on household budgets, a drawdown on savings and high interest rates could further fan out job weakness in other sectors, especially if wages don’t keep pace with inflation.

Wages for workers in the leisure and hospitality industry rose to $20.78 per hour in January from $19.42 a year earlier, according to the most recent data from the Bureau of Labor Statistics.
“There’s a difference between saying the labor market is tight and the labor market is strong,” Kelly said.
Many employers have faced challenges in attracting and retaining staff over the past few years, with challenges including workers’ child care needs and competing workplaces that might have better schedules and pay.
With interest rates rising and inflation staying elevated, consumers could pull back spending and spark job losses or reduce hiring needs in otherwise thriving sectors.
“When you lose a job you don’t just lose a job — there’s a multiplier effect,” said Aneta Markowska, chief economist at Jefferies.
That means while there might be trouble in some tech companies, that could translate to lower spending on business travel, or if job loss rises significantly, it could prompt households to pull back sharply on spending on services and other goods.

The big reset

Some of the recent layoffs have come from companies that beefed up staffing over the course of the pandemic, when remote work and e-commerce were more central to consumer and company spending.
Amazon last month announced 18,000 job cuts across the company. The Seattle-based company employed 1.54 million people at the end of last year, nearly double the number at the end of 2019, just before the pandemic, according to company filings.
Microsoft said it’s cutting 10,000 jobs, about 5% of its workforce. The software giant had 221,000 employees as of the end of June last year, up from 144,000 before the pandemic.

Tech “used to be a grow-at-all-costs sector, and it’s maturing a little bit,” said Michael Gapen, head of U.S. economic research at Bank of America Global Research.
Other companies are still adding employees. Boeing, for example, is planning to hire 10,000 people this year, many of them in manufacturing and engineering. It will also cut around 2,000 corporate jobs, mostly in human resources and finance departments, through layoffs and attrition. The growth aims to help the aerospace giant ramp up output of new aircraft for a rebound in orders with large sales to airlines like United and Air India.
Airlines and aerospace companies were devastated early in the pandemic when travel dried up and are now playing catch-up. Airlines are still scrambling for pilots, a shortage that has limited capacity, while demand for experiences such as travel and dining has surged.
Chipotle is planning to hire 15,000 workers as it gears up for a busier spring season and to support its expansion.

Holding on

Businesses large and small are also finding they have to raise wages to attract and retain workers. Industries that fell out of favor with consumers and other businesses, such as restaurants and aerospace, are rebuilding workforces after shedding workers. Walmart said it would raise minimum pay for store employees to $14 an hour to attract and retain workers.
The Miner’s Hotel in Butte, Montana, raised hourly pay for housekeepers by $1.50 to $12.50 for that position in the last six weeks because of a high turnover rate, Cassidy Smith, its general manager.
Airports and concessionaires have also been racing to hire workers in the travel rebound. Phoenix Sky Harbor International Airport has been holding monthly job fairs and offers some staff child-care scholarships to help hiring.
Austin-Bergstrom International Airport, where schedules by seats this quarter has grown 48% from the same period of 2019, has launched a number of initiatives, such as $1,000 referral bonuses, and signing and retention incentives for referred staff.
The airport also raised hourly wages for airport facilities representatives from $16.47 in 2022 to $20.68 in 2023.
“Austin has a high cost of living,” said Kevin Russell, the airport’s deputy chief of talent.
He said employee retention has improved.
Electricians, plumbers and heating-and-air conditioning technicians in particular, however, have been difficult to retain because they can work at other places that aren’t 24/7 and at at higher pay, he said.
Many companies’ new workers need to be trained, a time-consuming element for some industries to ramp back up, even if it’s gotten easier to attract new employees.
“Hiring is not a constraint anymore,” Boeing CEO Dave Calhoun said on an earnings call in January. “People are able to hire the people they need. It’s all about the training and ultimately getting them ready to do the sophisticated work that we demand.”
— CNBC’s Amelia Lucas contributed to this article.

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United says it is opening up more seats on aircraft to families traveling with children younger than 12.
The airline will give access at time of booking to “preferred” location seats to those travelers.
The change comes as the Biden administration and some lawmakers are seeking to tamp down airline passenger fees.

A United Airlines plane departs the Newark International Airport, in Newark, New Jersey, on January 11 2023.
Kena Betancur | Afp | Getty Images

United Airlines said Monday that new technology will open up more seats on its flights so children can sit with an adult in their party without paying a fee, a type of charge that’s drawn scrutiny from the Biden administration in recent months.
United will show parents or other adult travelers accompanying a child younger than 12 to access “preferred” seats as well as regular economy seats, if needed, at the time of booking so they can sit together.

The change applies to travelers with standard and basic economy tickets and will be fully in effect next month, although United has already increased some of the seat availability.
The airline also won’t charge customers a fare difference if they switch to a flight to the same destination that has adjacent seats.
Airlines in recent years have been charging travelers to book “preferred” location seats on flights. They don’t come with extra legroom or other perks but are often in front of the plane, though they can cover a significant number of seats of an aircraft.
President Joe Biden has called on lawmakers to “fast-track the ban on family seating fees,” the White House said earlier this month. In July, the Transportation Department told U.S. airlines to “do everything in their power” to ensure travelers under age 13 are seated next to an accompanying adult without additional charges.
“Baggage fees are bad enough,” Biden said during his State of the Union address earlier this month. “Airlines can’t treat your child like a piece of baggage.”

Such seats usually vary in price. On a roundtrip between Newark, New Jersey, and Los Angeles in August, preferred seats on a United flight showed as $37 each way for one person.
Delta Air Lines said it blocks certain rows of seats so families can sit together.
“Delta does not charge family seating fees and regardless of the ticket class purchased, will always work with customers on a case-by-case basis to ensure their family seating needs are met,” a spokesman said in a statement on Monday.
American Airlines’ booking platform will automatically search for available seats together at the time of booking for main cabin and basic economy passengers. Preferred seats and its extra legroom section, Main Cabin Extra, open up the day of departure if they’re needed, a spokesman told CNBC.

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The Terraces was just listed for $200 million, making it the most expensive home in the Caribbean.
The sprawling estate spans 17 acres and nine structures, and it features three swimming pools. 
It’s located on the small private island of Mustique, where Mick Jagger and Tommy Hilfiger have homes.

A palatial estate in the Caribbean was listed for a whopping $200 million Sunday evening, making it the most expensive home to ever hit the market in the region and one of the priciest homes for sale in the entire world.  
The Terraces, as the estate is called, spans 17 acres and nine structures. It’s located on the small private island of Mustique, which lies in the southern Caribbean nation of St. Vincent and the Grenadines. It is north of Trinidad and Tobago and about 45 minutes west of Barbados, if you’re taking a private plane.

“The Terraces in Mustique is the most expensive single residential home to publicly come to the open market in the Caribbean region,” said Edward de Mallet Morgan, head of international super-prime sales at Knight Frank, who represents the mega-listing.

The estate sits atop Endeavor Hill, one of Mustique’s highest summits.
Knight Frank

The majestic residence commands one of Mustique’s highest elevations, overlooking landscaped gardens and wild tropical grounds with panoramic views over the Atlantic and Caribbean coastlines. The estate’s 41-page marketing brochure boasts nine ensuite bedrooms in the main house, an 80-foot-long swimming pool and “the largest entertaining space on the entire island.”

The view from one of the estate’s three swimming pools.
Knight Frank

“Mustique is an island where incredibly high profile people go for incredibly low profile holidays,” said de Mallet Morgan, who declined to disclose the identity of the seller.
Mustique has a storied past. In 1958, Lord Glenconner, Colin Tennant, bought the entire island, which at the time had no roads and no running water, for £45,000. That’s about $1.2 million in today’s money, when adjusted for inflation. Tennant gifted a plot to his friend Princess Margaret, who built a villa there and helped spark a rush of rich and famous buyers who followed the royal and built their own homes, according to the island’s website.

The palatial mood and domed ceiling inside one of the main villa’s nine bedrooms.
Knight Frank

Decades later, it’s still an exclusive playground for titans of industry and rock stars. Tommy Hilfiger and Mick Jagger have homes on the isle. From its health clinic to security, the island is wholly managed by the Mustique Company, a private operation owned by the island’s homeowners. The website states: “The company oversees every aspect of island life as well as the management of the villas on behalf of the shareholders and the safeguarding of the island.”

The view from the pool deck.
Knight Frank

Natural beauty and unrivaled privacy make the island a perfect destination for the ultra wealthy to kick back and relax.
“Paparazzi are banned on Mustique, and the easy, relaxed interaction of royal families, rock stars, celebrities, business moguls and entrepreneurs is really unique to Mustique,” said de Mallet Morgan.
“It is a place where doors are not locked and no one bats an eye when you arrive at dinner barefoot.” 

The view from above the estate’s 80-ft long swimming pool.
Knight Frank

De Mallet Morgan shared data with CNBC from Knight Frank’s upcoming Wealth Report, which shows that out of 100 key city, sun and ski destinations around the world, Mustique was the 12th best performing market. The ranking puts the remote island on par with Sardinia, St. Bart’s and Provence.  
According to the report, luxury residential prices on Mustique rose by 12% in 2022, making the island the fifth best performing market in the Americas after Aspen, Miami, Bahamas and the Hamptons.
Record sales during the pandemic led to tighter inventory. Last year, Mustique’s largest transaction was recorded at about $35 million, according to de Mallet Morgan.
Here’s a closer look at the most expensive home to ever hit the market  in the Caribbean.

A fountain in the courtyard entrance of the main home.
Knight Frank

Built in 1986, the mega villa is clad in a pale peach-colored stone facade with loggias that wrap around each side of the more than 16,000-square-foot residence. According to marketing materials, the Terraces was designed by architect Tom Wilson, who pays homage to the architecture of 16th century Italian palaces.

A dining area in the main residence.
Knight Frank

Inside there are hand-painted ceilings and mural-covered walls painted by French artist Jean-Claude Adenin in a project that spanned three years.

A bedroom in the main home.
Knight Frank

The mega-villa’s palatial rooms, gilded furniture and painted domed ceilings are decidedly more Versailles than beach chic.

A grand salon in the main house.
Knight Frank

“The Terraces, being the largest and most visually prominent property on the island is not just one of the Caribbean’s foremost houses, but arguably one of the world’s foremost homes,” de Mallet Morgan told CNBC.

The main home’s infinity-edged pool appears to spill into the estate’s lush green landscape.
Knight Frank

A floor plans shows a 60-foot tunnel connecting the main villa to a structure just below called the Annex. The two buildings are also connected by exterior pathways. The Annex spans over 12,000 square feet and is dedicated to games and entertainment. It houses a grand event hall and a game room with ping-pong, billiards and chess. Just outside, there’s a wraparound terrace that features the estates second swimming pool with an infinity edge that appears to send water cascading down the hillside.

The Terrace’s Annex is in the foreground just below the main villa, together the two structures span about 28,000 sq ft.
Knight Frank

Other structures on the property include guest cottages that span 2,600 square feet and include four more bedrooms, as well as the estate’s third swimming pool. 

The Bali Cottages house four more guest bedrooms and surround the estate’s third swimming pool.
Knight Frank

There’s also a chapel, laundry facilities and two more buildings to accommodate staff. De Mallet Morgan said the estate is currently operated by 18 staff. The estate’s webpage breaks it down further to a property manager, two butlers, three chefs, six housekeepers and six gardeners.

Tennis court and pavillion.
Knight Frank

Across a rolling lawn is a pavilion that overlooks a sun-drenched tennis court.   

The terrace and pool at the Annex.
Knight Frank

The interior square footage of the entire estate tops 38,000. It climbs to almost 53,000 square feet when you add all of its covered outdoor areas.
De Mallet Morgan told CNBC if a foreign buyer wants to purchase the trophy property he or she can expect to pay taxes and fees of about 12% on the purchase price, adding around $24 million to the $200 million price tag.

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