Home Depot Profit Tops Analysts' Estimates as Sales Increase

Home Depot Inc., the largest U.S. home-improvement retailer, reported second-quarter profit that exceeded analysts’ estimates as U.S. sales rose 1 percent amid high unemployment.

Net income increased 6.8 percent to $1.19 billion, or 72 cents a share, in the quarter ended Aug. 1, from $1.12 billion, or 66 cents, a year earlier, Atlanta-based Home Depot said today in a statement. Analysts projected 71 cents, the average of 23 estimates in a Bloomberg survey.

Sales at U.S. stores open more than a year rose in line with the median estimate of three analysts. Home Depot raised its full-year earnings forecast, while lowering its prediction for sales growth, as U.S. unemployment near a 27-year high and sagging home values restrain spending by homeowners.

“They are doing a great job of holding expenses in line on disappointing sales trends,” Laura Champine, an analyst at Cowen & Co. in New York, said today in a Bloomberg Television interview. She rates the shares “neutral.”

Home Depot advanced 93 cents to $28.31 at 4:01 p.m. in composite trading on the New York Stock Exchange. The shares have declined 2.1 percent this year.

The retailer said earnings from continuing operations may rise 23 percent to $1.90 a share, after projecting in May that earnings would total $1.88. Analysts predict $1.90 on average.

Lowe’s Forecast

Sales so far in August are “on our plan” and better than in July, Chief Financial Officer Carol Tome said today on a conference call, without providing specifics. She said an increasing number of transactions will spur sales in the second half, while the value of the average purchase isn’t expected to grow.

Second-quarter sales increased 1.8 percent to $19.4 billion, trailing the average analysts’ estimate of $19.6 billion. Home Depot expects that sales will gain 2.6 percent this year, cutting the prediction from 3.5 percent.

Lowe’s Cos., the second-largest home-improvement chain, reduced its full-year sales growth projection yesterday to 4 percent, from a range of 5 percent to 7 percent in May.

Home Depot’s operating expenses declined to $4.53 billion from $4.56 billion last quarter. Selling, general and administrative costs of $4.13 billion were little changed.

The company operated 2,244 stores at the end of the quarter, including 1,976 in the U.S., Puerto Rico, Guam and the Virgin Islands.

Retail Sales

FBR Capital Markets estimated U.S. comparable-sales growth of 0.5 percent. Sanford C. Bernstein & Co. predicted 1 percent and Robert W. Baird & Co. projected 2 percent.

In July, sales at U.S. retailers rose less than economists projected, signaling restrained spending and consumer confidence until companies start hiring again.

Purchases climbed 0.4 percent last month in the U.S., led by autos and gasoline, according to data from the Commerce Department released on Aug. 13. Economists forecast retail sales would rise 0.5 percent, according to the median of 77 projections in a Bloomberg News survey.

Wal-Mart Stores Inc., the world’s biggest retailer, reported today that second-quarter profit rose 3.6 percent, as overseas growth muted a 1.8 percent sales decline in U.S. stores open at least a year.

Target Corp., the discount chain, is scheduled to report tomorrow.

To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net.

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