Consumers are taking on smaller home improvement projects as higher interest rates and inflation take their toll.

Home Depot said Tuesday that sales fell 4.5% at stores open at least a year during its latest quarter, and its income decreased 6.4% from the same stretch a year ago.

The company also lowered its sales expectations for the year. It expects sales to decline between 2% and 5% in 2023 from a year prior.

Home Depot said 2023 would be a "year of moderation" for the home improvement market, and sales for the quarter were below its expectations.

The company's stock fell 3.5% during pre-market trading Tuesday.

"The state of the homeowner is that they're very healthy," Home Depot chief financial officer Richard McPhail said in an interview with CNBC. "But I do think — and our professional customers tell us they hear this from their customers — there is that shift, even if it's temporary, from larger projects into smaller ones."

Target, Walmart and other retailers also report earnings this week, giving investors and economists more data about sentiment among US consumers.