Home Depot said elevated supply chain costs will continue to weigh on profits in 2022, after recording a decline in gross profit margins for the holiday quarter despite higher prices and resilient consumer demand.

The do-it-yourself frenzy brought on by the coronavirus pandemic has endured, defying expectations that consumers would spend less on home renovations as lockdown restrictions eased. A hot housing market has helped stoke demand for paint, patio furniture and appliances while supporting a recovery for contractors and builders whose businesses ground to a halt in the early days of the pandemic.

At the same time, retailers such as Home Depot are navigating labour shortages and supply chain bottlenecks that have driven up costs tied to wages, shipping and materials, squeezing profits.

The US retailer’s gross profit margin fell 36 basis points to 33.2 per cent in the fourth fiscal quarter, missing Wall Street’s estimate of 33.5 per cent, according to Refinitiv data.

Richard McPhail, Home Depot’s chief financial officer, said investments in building out the company’s supply chain would continue to pressure gross margins this year.

Home Depot also forecasts its growth will slow this year as the pandemic-fuelled sales boom begins to level off. The Atlanta-based company expects full-year comparable sales growth to be “slightly positive” following an 11.4 per cent rise in fiscal 2021, with diluted earnings per share growth at “low single-digits”.

Home Depot shares fell more than 9 per cent in afternoon trading on Tuesday.

Still, the retailer booked another year of record sales, which rose 14.4 per cent year on year to $151.2bn, and announced a 15 per cent increase in its quarterly dividend.

Home Depot revenues climbed 10.7 per cent in the holiday quarter to $35.7bn, above forecasts for $34.8bn. The number of customer transactions fell 3.4 per cent from the year-ago quarter, while the average purchase jumped 12.4 per cent.

Sales to professional customers grew faster than DIY sales in the fourth quarter, but demand in both markets accelerated from the third quarter, the company said.

“Everything we hear from our pro customers is they’ve got more work than they can handle. I know for myself, it took a while to get somebody out to just do simple projects around my house. We hear that all over the country, said Craig Menear, chair and chief executive, during an earnings call.

Rising property values ??have encouraged Americans to invest in their homes. Home prices jumped 18.8 per cent in 2021 compared with the previous year, the biggest annual increase across 34 years of data, according to the S&P Corelogic Case-Shiller index.

But elevated prices and looming interest rate increases threaten to cool down the housing market as many first-time buyers move to the sidelines.

The proportion of US consumers planning to purchase homes, cars, big appliances and book vacations over the next six months fell in February, as inflation fears drove a decline in the Conference Board’s consumer confidence index for the second straight month.

Retailer Macy’s on Tuesday joined Home Depot in flagging challenges related to inflationsupply chain constraints and labour shortages as it forecast full-year adjusted earnings in the range of $4.13 to $4.52 per share, down from last year’s $5.31. It expects net sales to be flat to up 1 per cent in fiscal 2022.

Macy’s boosted its quarterly dividend by 5 per cent and announced a $2bn share buyback plan after it reported strong fourth-quarter earnings that beat forecasts and predicted better than expected sales this year.

The New York-based department store chain rejected calls from activist investor Jana Partners to spin off its ecommerce business, as it reported a 12 per cent year-on-year rise in its digital sales during the holiday quarter.