Home Depot Profit Tops Estimates as Sales Rise
Salvenita Foster works at a Home Depot store in the Brooklyn borough of New York. Photographer: Ramin Talaie/Bloomberg
May 17 (Bloomberg) -- Gary Balter, an analyst for Credit Suisse, talks with Bloomberg's Deirdre Bolton about the quarterly performance of Lowe's Cos Inc. Lowe’s, the second-largest U.S. home-improvement retailer, said first-quarter net income rose to 34 cents a share. Balter also discusses the correlation of the U.S. economic recovery to the home-improvement retailer outlook. (Source: Bloomberg)
Home Depot Inc., the largest U.S. home-improvement retailer, raised its annual profit forecast after first-quarter earnings exceeded analysts’ estimates.
Excluding some items, earnings were 45 cents a share in the quarter ended May 2, Home Depot said today in a statement. Analysts projected 40 cents, the average of 24 estimates compiled by Bloomberg. The retailer increased its forecast for full-year profit to $1.88. Analysts estimate $1.87 on average.
Home Depot, based in Atlanta, cut prices on flowers, fertilizers and patio furniture last quarter, and benefited from government rebates on energy-efficient appliances. Customers were still reluctant to spend on large items, with the number of transactions for more than $900 “down slightly,” Chief Financial Officer Carol Tome said in a telephone interview.
Home Depot fell 73 cents to $34.86 at 1:57 p.m. in New York Stock Exchange composite trading. The shares had climbed 23 percent this year before today, while the Standard & Poor’s 500 Index rose 2 percent.
“Expectations were high going into the quarter as the market anticipated favorable spring weather, government stimulus programs, and supplier data indicating a strong start to the year was under way in seasonal categories,” Wayne Hood, an analyst at BMO Capital Markets in Atlanta, wrote in a note to investors. He rates the stock “underperform.”
Customer visits increased 13 million to 323 million in the quarter, the retailer said. The number of transactions for $50 or less, covering basic home repairs, rose 4.7 percent, Tome said.
‘Very Soft’
“We said the recovery would happen with more transactions than ticket growth in the first half of the year,” Tome said. “Special-order kitchens, which are a big-ticket discretionary project, are still very soft.”
Lowe’s Cos., the second-largest home-improvement retailer, yesterday projected second-quarter earnings that trailed analysts’ estimates. The Mooresville, North Carolina-based retailer said that consumers remain reluctant to spend because they are concerned about unemployment and declining home prices.
Home Depot said sales may rise about 3.5 percent this year, up from a Feb. 23 projection of about 2.5 percent. The retailer raised its full-year profit forecast from an earlier prediction of $1.79.
Revenue advanced 4.3 percent to $16.9 billion in the first quarter, Home Depot said. Sales in stores open at least a year jumped 4.8 percent.
Net income increased to $725 million, or 43 cents a share, from $514 million, or 30 cents, a year earlier, Home Depot said.
To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net.
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