Aug. 19 (Bloomberg) -- Home Depot Inc., the world's largest home-improvement retailer, reported profit that fell less than analysts estimated after U.S. consumers grappling with the worst housing slump since the 1930s spent tax rebates.

The retailer forecast a 24 percent earnings decline for the year, indicating that home-improvement sales will drop further even after second-quarter net income exceeded analysts' projections by 10 cents a share. Chief Executive Officer Frank Blake said in a statement today that the company sees ``pressure on our market and the consumer.''

Sales fell 5.4 percent, the seventh decline in the past eight quarters, and may retreat 5 percent this year, the retailer said. Home Depot followed Lowe's Cos. in forecasting lower annual profit after the government's tax checks boosted second-quarter earnings.

``The quarter held up better than we thought, but they're still just as negative on the rest of the year,'' Laura Champine, an analyst with Morgan Keegan & Co., said in an interview.

Second-quarter net income dropped 24 percent to $1.2 billion, or 71 cents a share, from $1.59 billion, or 77 cents, a year earlier, Atlanta-based Home Depot said in a statement.

Full-year profit from continuing operations may decline 24 percent, Home Depot said. In May, Home Depot said it was ``comfortable'' with the low end of its forecast of 19 percent to 24 percent. That equates to $1.73 a share. Analysts estimated $1.71.

Share Performance

Home Depot, which has 2,257 locations, fell 6 cents to $26.90 at 9:32 a.m. in composite trading on the New York Stock Exchange. The shares climbed 13 percent this month before today, compared with a 21 percent gain by Lowe's, the world's second-largest home-improvement retailer.

Revenue fell to $21 billion from $22.2 billion. Home Depot said. Sales in stores open at least a year dropped 7.9 percent. Champine estimated same-store sales would decline 9 percent. Colin McGranahan, an analyst with Sanford C. Bernstein & Co. projected a 10 percent drop.

Twenty-two analysts surveyed by Bloomberg estimated average second-quarter profit of 61 cents a share. Seventeen estimated sales of $20.6 billion.

Lowe's reported profit yesterday that fell 7.9 percent, a smaller decline than some analysts estimated.

Cost Cuts

Blake is cutting headquarters' staff to help pay for more workers on the sales floor as Home Depot contends with the housing slump.

``They're operating well in a very challenging environment,'' Jaison Blair, an analyst with Rochdale Securities Corp. in Stamford, Connecticut, said in an interview.

Operating income was 9.7 percent of sales. Colin McGranahan, an analyst with Sanford C. Bernstein & Co., estimated it would be 8.8 percent.

``On the product and merchandise side of our business, we've had significant progress,'' Blake said today on a conference call with analysts. ``We've had better execution across the board.''

Rebate checks may have added $300 million in sales during the quarter, Blake said.

Home Sales

Existing U.S. home sales fell to a 10-year low in the second quarter, and the median price for a single-family house dropped 7.6 percent, the Chicago-based National Association of Realtors said Aug. 14.

Stricter lending rules, rising borrowing costs, falling property values and record foreclosures may further depress home sales and cause builders to keep retrenching into 2009. Purchases of existing houses trigger home-improvement spending as owners prepare for a sale and buyers paint or remodel after moving in.

The median price of an existing single-family home dropped 1.8 percent in 2007, the first decline since records began four decades ago and probably the first since the 1930s, the Realtors group has said.

Regular gasoline, averaged nationwide, reached a record $4.114 a gallon on July 17. The price declined to $3.73 as of yesterday, according to AAA.

Ten analysts who follow Home Depot suggest buying the stock, 10 say ``hold'' and three recommend selling it, according to data compiled by Bloomberg.

To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net

Last Updated: August 19, 2008 09:34 EDT