Home Depot’s revenue fell short of Wall Street’s estimates in its fiscal fourth-quarter earnings report Tuesday amid a slowdown in the home improvement category.

The company also provided a muted outlook for the next year because of a tough consumer backdrop.

Here’s what Home Depot posted, compared with 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 closed down more than 7% down Tuesday.

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, or $3.30 per share, 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 but are now down about 50% year over year.

“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. It projects an operating margin rate of about 14.5%, which is impacted by a $1 billion investment Home Depot is making in wage growth. 

In the quarter, its operating margin was about 33.3%, and executives said they saw “increased pressure from shrink during the back half of the year.”

Home Depot expects a mid-single-digit percent decline in diluted earnings per share. If lumber prices remain at current levels for the remainder of the next fiscal year, the company expects 1% “of pressure to comp sales and an insignificant impact to earnings,” McPhail said.

“At today’s current price, this would imply more pressure in the first half than in the rest of the year,” the executive said.

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 toward experiences and travel as many burn through their savings amid consistent inflation. If that shift continues, the company expects the home improvement market to be down low single digits, McPhail told investors on an earnings call.

Still, the company insisted investments Home Depot has made positions it to “take share in any environment” and its confident it’ll overcome any market pressures.

Read the full earnings release here.