NEW YORK (CNN/Money) - Home Depot posted fourth-quarter earnings Tuesday that fell 3.3 percent in light of a growing competitive threat from Lowe's but still beat Wall Street expectations.

The home improvement chain, the second-largest retailer in the nation after Wal-Mart Stores (WMT: up $0.84 to $48.48, Research, Estimates), also warned that same-store sales -- or sales at stores open at least a year -- are expected to be flat to slightly positive this year.

Additionally, the Atlanta-based retailer said it would continue to give sales and earnings forecasts for the year but would no longer offer guidance on a quarterly basis.

"Home Depot's results weren't a huge surprise," said Mark Mandel, analyst with Blaylock and Partners. "Home Depot is basically a turnaround in progress, but the company did say it expects the back half of the year to show some material improvement. So that explains why it's not giving quarterly guidance."

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The company earned $686 million, or 30 cents a share, in the fourth quarter ended Feb. 2. That's down from $710 million, also 30 cents a share, earned a year earlier. Analysts surveyed by earnings tracker First Call lowered their consensus earnings-per-share forecast to 27 cents from 31 cents after the company lowered its sales and profit guidance Jan. 2.

Sales in the quarter fell to $13.2 billion from $13.5 billion a year earlier, which beat First Call's forecast of $12.9 billion. Sales at stores open at least a year, a closely watched retail measure known as same-store sales, fell 6 percent in the period, which was better than the 10 percent drop the company expected at the beginning of January.

For the fiscal year ending next January, Home Depot (HD: up $0.77 to $22.95, Research, Estimates) reaffirmed earlier guidance for sales to grow between 9 percent and 12 percent and earnings per share to grow between 9 percent and 14 percent. That would bring both measures slightly higher than current forecasts, with sales between $63.5 billion and $65.2 billion, and earnings per share between $1.70 and $1.78. First Call's forecast calls for revenue of $63.3 billion and EPS of $1.66.

The earnings drop was the company's first in two years, and the sales decline is the company's first as a public company.

Home Depot has been losing sales to competitor Lowe's Cos. (LOW: up $0.46 to $38.56, Research, Estimates), which Monday reported improved sales and profits that topped forecasts, but also said it was "cautiously optimistic for 2003" on the back of a vibrant and improving home improvement market.

Analysts point out that much of the retailer's woes come from the fact that the company, which currently operates about 1,370 Home Depot stores in the United States, is facing a mature and saturated market with little expansion opportunity.

Meanwhile, Lowe's, the No. 2 home improvement chain, continues to nibble away at its market share -- taking advantage of its unique position as a hardware retailer that also caters to women -- while delivering the kind of forecasts that Wall Street wants to hear.

Home Depot said it expects to open 200 new stores this year and upped its capital expenditures for the year to $4 billion, with $250 million budgeted for store remodeling. The majority, or about 61 percent, of the new stores are slated to open in the second half. Last Sunday the company unveiled its new national ad campaign during the Grammy Awards with the theme "The Home Depot is more than a store. -- You can do it. We can help."

"Undoubtedly the changes being implemented will be a positive, but the questions we ask are: When will they begin to gain traction? and How impactful will they be?" said Merrill Lynch analyst Douglas Neivera. "Lowe's push could continue to make progress difficult to measure in the quarters ahead."

The firm maintained a "neutral" rating on the stock.

Nevertheless, if there's one silver lining for the home improvement sector, it's the robust housing activity. Industry watchers said a piping hot housing market continues to be a boon to both Home Depot and Lowe's in an otherwise challenging economic and business environment.