Richard McPhail
Chief Financial Officer & Executive Vice President at Home Depot
Thank you, Jeff, and good morning everyone.
In the fourth quarter, total sales were $35.8 billion, an increase of approximately $100 million, or 0.3% from last year. During the fourth quarter, our total company comps were essentially flat at negative 0.3% for the quarter. As Jeff mentioned, lumber prices in the quarter negatively impacted comp sales by approximately 70 basis points. We had comps of negative 1.3% in November, positive 0.8% in December, and negative 0.1% in January. Comps in the US were negative 0.3% for the quarter, with negative comps of 0.4% and 1.4% in November, positive 0.7% in December, and negative 0.1% in January. For the year, our sales totaled a record $157.4 billion with sales growth of $6.2 billion, or 4.1% versus fiscal 2021. For the year, total company comp sales increased 3.1% and US comp sales increased 2.9%. In the fourth quarter, our gross margin was approximately 33.3%, an increase of seven basis points from last year.
For the year, our gross margin was approximately 33.5%, a decrease of 10 basis points from last year. Gross margin was in line with our expectations, reflecting planned investments in our supply chain capabilities. Throughout the year, we continued to successfully offset significant transportation and product cost pressures as well as increased pressure from shrink during the back half of the year and we did this while maintaining our position as the customer's advocate for value.
During the fourth quarter, operating expenses were approximately 20% of sales, representing an increase of 32 basis points from last year. Our operating expense deleverage is driven largely by charges unique to the quarter related to litigation in California storm-related expenses and an unfortunate fire in one of our stores. For the year, operating expenses were approximately 18.3% of sales representing a decrease of 13 basis points from fiscal 2021. Our operating margin for the fourth quarter was approximately 13.3%, and for the year was approximately 15.3%. Interest and other expense for the fourth quarter increased by $85 million to $408 million due primarily to higher long-term debt levels than one year ago.
In the fourth quarter, our effective tax rate was 22.6% and for fiscal 2022 was 23.9%. Our diluted earnings per share for the fourth quarter were $3.30, an increase of 2.8% compared to the fourth quarter of 2021. Diluted earnings per share for fiscal 2022 were $16.69, an increase of 7.5%, compared to fiscal 2021. During the year, we opened six new stores and lost a store in California due to a fire bringing our store count to 2,322 at the end of fiscal 2022. Retail selling square footage was approximately 241 million square feet at the end of fiscal 2022. Total sales per retail square foot were approximately $627 in fiscal 2022, the highest annual figure in our company's history. At the end of the quarter, merchandise inventories were $24.9 billion, an increase of $2.8 billion versus last year and inventory turns were 4.2 times, down from 5.2 times from the same period last year.
Moving to capital allocation. During the fourth quarter, we invested approximately $900 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2022 to $3.1 billion. During the year, we paid approximately $7.8 billion of dividends to our shareholders. We look to grow our dividend every year as we grow earnings. And as Ted mentioned today, we announced our Board of Directors increased our quarterly dividend by 10% to $2.09 per share, which equates to an annual dividend of $8.36 per share.
And finally, during fiscal 2022, we returned approximately $6.5 billion to our shareholders in the form of share repurchases including $1.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 44.6% compared to 44.7% at the end of the fourth quarter of fiscal 2021.
Now, I'll comment on our outlook for 2023. As we think about how 2023 might unfold, we think it's helpful to look back on our performance since 2019. From 2019 through 2022, we grew sales by $47.2 billion, a compound annual rate of 12.6%. During the first five quarters of this period from the first quarter of 2020 through the first quarter of 2021, our sales were driven by significant ticket and transaction growth. This growth reflects factors unique to home improvement, as homeowners spent more time in their homes and took on more projects, as they saw their homes significantly increase in value over that period.
The home improvement market also captured a greater share of the consumer's wallet, as spending on goods outpaced spending on services during the period. Beginning in the second quarter of 2021 and continuing through the fourth quarter of 2022, we reported strong sales and earnings growth driven by ticket while transactions steadily normalized back towards 2019 levels as the broader consumer economy shifted from goods and back into services. During this time, we continued to report positive sales growth in every quarter up to present.
As we set targets for 2023, the context of the past three years led us to consider three factors that will likely influence our performance this year. First, the starting point for our target setting this year is our assumption regarding consumer spending. We've assumed like many economists that we will see flat real economic growth and consumer spending in 2023. Second, over the last seven quarters, we have seen our transactions gradually normalize as consumer spending has shifted from goods to services. We believe that if this shift continues at its current pace, the home improvement market would be down low-single digits. And third, as an offset to this pressure, we plan to continue to capture market share. Our competitive advantages, the investments we have made over many years and the unique advantage that our orange-blooded associates give us over our competition position us to take share in any environment. Taking these factors into account, we are targeting approximately flat sales and comp sales growth for 2023.
Further, our operating margin target of 14.5% reflects approximately 60 basis points of impact from the compensation investment we announced today. Our effective tax rate is targeted at approximately 24.5%. Our diluted earnings per share, is targeted to decline by a mid-single-digit percentage. Outside of this target setting, if lumber prices remain at current levels for the remainder of our fiscal year that would equate to approximately 100 basis points of pressure to comp sales and an insignificant impact to earnings. At today's current price, this would imply more pressure in the first half than in the rest of the year. We plan to continue investing in our business with capex of approximately 2% of sales on an annual basis. After investing in our business and paying our dividend, it's our intent to return excess cash to shareholders in the form of share repurchases. We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model. As we look forward, we will continue to invest to strengthen our position with customers, leverage our scale and low-cost position to drive growth faster than the market and deliver shareholder value.
Thank you for your participation in today's call. And Christine, we are now ready for questions.
