May 20 (Bloomberg) -- Home Depot Inc., the world's largest home-improvement retailer, dropped the most in nine months in New York trading after first-quarter profit fell 66 percent and Chief Financial Officer Carol Tome said full-year earnings may be at the low end of the retailer's previous forecast.

Chief Executive Officer Frank Blake, who took over from Robert Nardelli last year, cut headquarters jobs and hired plumbers and electricians to advise consumers who have limited spending as they face the deepest housing slump in at least 25 years. Home Depot profit has declined the past seven quarters, while Lowe's Cos. earnings have fallen in five of the past six.

``The home-improvement market remains difficult, but we believe the results show that Home Depot is making early progress in its efforts to refocus,'' Chris Horvers, an analyst with Bear Stearns & Co., wrote in a research note today.

Net income decreased to $356 million, or 21 cents a share, from $1.05 billion, or 53 cents, a year earlier, on costs to close stores, Atlanta-based Home Depot said today in a statement. Profit excluding some expenses was 41 cents a share, beating analysts' estimates by 4 cents.

Revenue for the three months through May 4, excluding the wholesale-supply unit Home Depot sold last year, fell 3.4 percent to $17.9 billion.

Home Depot reiterated May 1 that profit from continuing operations for the year that ends in early 2009 is expected to drop 19 percent to 24 percent from a year earlier.

Home Depot is ``comfortable'' with the low end of the range, Tome said today on a conference call with analysts and investors.

Shares Fall

Home Depot declined $1.50, or 5.2 percent, to $27.37 at 4:04 p.m. in composite trading on the New York Stock Exchange, the biggest decline since August 2007. Home Depot has gained 1.6 percent this year after falling each of the previous three years. Lowe's has increased 5 percent.

``These results really reflect what we're seeing in the housing market,'' Jeffrey Malcom, who helps manage $500 million at Horan Capital Management LLC in Towson, Maryland, said today in a Bloomberg Radio interview. ``It's a severe recession at this point.'' Horan owned about 1.1 million Home Depot shares through March.

Twenty-one analysts estimated profit of 37 cents a share excluding some costs, the average in a Bloomberg survey. Seventeen analysts projected sales of $17.6 billion.

Home Depot repurchased no shares in the quarter and has put its recapitalization program ``on pause until we see stability in our business and the credit markets,'' Tome said today in a telephone interview from Atlanta.

The retailer lost market share in half of its 13 categories, with a variety of competitors gaining in faucets, bath fixtures and interior lighting, Tome said.

Carpet Share

In carpet, Home Depot regained market share by adding less-expensive varieties and simplifying installation services. The retailer offered to lay carpet throughout the entire house for $199, the finance chief said.

Comparable-store sales are still negative in May, although in line with Home Depot's expectations, Tome said. Consumers spent $57.36 per transaction in the first quarter, down 2.8 percent from a year earlier.

``We know that customers are feeling the pinch,'' Tome said. ``It is expensive as heck to fill up our cars. It's shocking what we are paying for groceries.''

Profit Forecast

Sales at stores open at least a year dropped 6.5 percent, helped by an extra week. That was less than the 7 percent decline estimated by Horvers. He recommends investors buy Home Depot shares. So-called same-store sales have declined the past two years.

The retailer said May 1 that it will eliminate 1,300 jobs, close 15 stores and scrap plans for 50 more. The moves cost Home Depot $543 million in the first quarter.

Slowing the store openings will free up $1 billion over three years, Blake said on a conference call with analysts and investors.

``Home Depot is bouncing back from the problems that Nardelli passed along,'' Burt Flickinger, managing director at New York-based Strategic Resource Group, said in a Bloomberg Television interview. Blake ``is doing a great job with his team in rebuilding the business for the future.''

Lowe's Profit

Profit at Lowe's dropped 18 percent to $607 million, or 41 cents a share, and the retailer forecast full-year earnings that trail some analysts' estimates. Sales declined 1.3 percent to $12 billion, Mooresville, North Carolina-based Lowe's said yesterday.

Record gasoline prices that surged past $3.75 a gallon and declining home values have caused consumers to limit spending, pushing the U.S. economy toward a recession. U.S. consumer confidence, as measured by the Reuters/University of Michigan preliminary index of consumer sentiment, fell in May to the lowest level in almost 28 years, according to the survey released May 16.

Sales of previously owned homes, which account for about 85 percent of the housing market, fell in March, the seventh decline in eight months. Purchases of existing houses typically trigger home-improvement spending as owners prepare for a sale and buyers paint or remodel after moving in.

To contact the reporters on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net; Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net.

Last Updated: May 20, 2008 16:18 EDT