VOL. 123 | NO. 227 | Wednesday, November 19, 2008
Home Depot Q3 Profit Falls 31 Percent
By ASHLEY M. HEHER | AP Retail Writer
CHICAGO (AP) - The Home Depot Inc., the nation's largest home improvement chain, said Tuesday that its third-quarter profit sank by nearly a third as shoppers scaled back on everything from custom kitchens to lumber and flooring.
The company also forecast a steeper drop in full-year sales due to the still-challenging housing and home improvement markets that are vexing the industry.
"You all obviously know that this is a difficult environment," said Chief Executive Frank Blake. "The view we had at the start of the quarter, that we might be nearing the bottom ... gave way to the financial crisis in September and beyond."
But despite the grim environment, the Atlanta-based home improvement chain still managed to top Wall Street's expectations.
"We had a good earnings quarter in the third quarter," said Chief Financial Officer Carol Tome. "Our earnings were better than our plan."
Home Depot's results followed a better-than-expected third quarter report from competitor
Tap into millions of public records, notices and articles on The Daily News with our ever-growing line of services.
Try one of these to get you started:Name SearchWatch Service
'>Lowe's Cos. Inc. on Monday. Lowe's beat Wall Street analysts' profit estimates, even as earnings dropped more than 24 percent because shoppers postponed big-ticket purchases.
Stifel Nicolaus & Co. analyst David Schick said the back-to-back beats may show signs of "resilience, albeit with sustained significant top-line pressure" in the sector.
Home Depot's profit tumbled 31 percent to $756 million, or 45 cents per share. That's down from $1.09 billion, or 60 cents per share, in the same period last year. Revenue sank 6 percent to $17.78 billion from $18.96 billion.
Analysts polled by Thomson Reuters expected earnings of 38 cents per share on revenue of $17.74 billion.
Same-store sales, or sales at stores open at least a year, dropped 8.3 percent. Same-store sales are a key indicator of retailer performance since they measure growth at existing stores rather than newly opened ones.
Home Depot tried to draw in customers by cutting prices between 5 percent and 50 percent on as many as 1,200 items. But that strategy may have only reduced the average value of customers' purchases, which fell about 3 percent during the period to $55.86.
The number of transactions in the quarter also dropped by about 3 percent and executives said shoppers are finding it harder to obtain credit – a trend that could further constrain sales.
"We're generally seeing continued softness in tough markets and erosion in previously strong markets," Blake said.
Consumers have largely been avoiding making any big purchases and have been significantly restricting discretionary spending due to fear of a prolonged recession and the turmoil affecting the financial markets.
Home Depot also said it was affected by a change in the yearly calendar that hurt sales by about $225 million.
The retailer still expects earnings per share from continuing operations to decline 24 percent for the fiscal year. The guidance does not include a charge from closing 15 stores and removing 50 stores from its growth plans.
But the company now expects a sharper drop in sales for the year. Home Depot said its sales could drop by as much as 8 percent. Previously, the company had said it expected a decline of 5 percent for the year.
Home Depot shares climbed $1.13, or 5.7 percent, to $21.13 in morning trading Tuesday.
AP Retail Writer Lauren Shepherd contributed to this report.
On the Net:
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.