Home Depot Inc HD Stocks slide on weak quarterly results and one analyst sees the report as a sign consumer spending is slowing because of inflation.

Home Depot Q4 results: home depot reported fourth-quarter revenue of $35.83 billion, which missed estimates of $35.97 billion. The hardware store posted quarterly earnings of $3.30 per share, slightly above estimates of $3.28 per share.

Fourth-quarter revenue rose just 0.3% year over year, below analysts’ expectations. Home Depot warned that 2023 sales growth and comparable sales growth will be roughly flat compared to 2022.

Related link: Home Depot reports mixed Q4 earnings, raises dividend 10%, forecasts expect earnings per share to fall in fiscal 23

What it means: Telsey Advisory Group analyst Joseph Feldman reiterated an outperform rating on Home Depot with a price target of $360 following the company’s quarterly results. While the stock could be positioned to outperform, the economy appears to be softening, the analyst said.

Earnings were broadly in line with expectations, but margins are beginning to come under pressure, reflecting a tougher consumer environment and weaker home improvement demand, Feldman said, adding that the weaker trends are being driven by declining home sales and slowing remodeling activity.

“Ticket increased 5.8%, indicating inflation and spending on major ticket categories and projects, while transactions fell 6.0%, compared to a 3.4% drop last year and a 12.8% increase in 4Q20,” the Telsey analyst said, highlighting the decline in transaction trend.

Feldman expects the general softness to transpire Lowes Companies Inc LOW Quarterly results due next week. The analyst expects continued outperformance, adding that given the uncertain environment, a cautious approach is likely warranted.

See also: Lowe’s stock slides after Home Depot’s quarterly results: What’s going on?

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