Home Depot Raises Annual Forecast as Quarterly Profit Beats Estimates

Home Depot Inc. (HD), the largest U.S. home improvement retailer, raised its full-year profit forecast after second-quarter profit exceeded analysts’ estimates, spurred by increased traffic and spending by customers.

Net income advanced 14 percent to $1.36 billion, or 86 cents a share, in the quarter ended July 31, from $1.19 billion, or 72 cents, a year earlier, the Atlanta-based company said today in a statement. Analysts projected 82 cents, the average of 21 estimates in a Bloomberg survey.

Home Depot, led by Chief Executive Officer Frank Blake, boosted the number of transactions by 1.1 percent to 373 million, the sixth increase in the past seven quarters. Lawn and garden sales rebounded from rainy, colder-than-average temperatures in the first quarter, boosting sales from older stores more than analysts had projected.

“Home Depot has gotten their mojo back,” Joe Feldman, an analyst at Telsey Advisory Group in New York, said in an interview. “They are operating well, the stores look better, there’s more service on the floor.”

Revenue from Home Depot stores open at least 12 months climbed 4.3 percent, exceeding the median forecast of a 1 percent gain by Janney Capital Markets, Piper Jaffray Cos. and JPMorgan Chase & Co. Revenue gained 4.2 percent to $20.2 billion, helped by purchases related to storm repairs. The value of the average sale rose 3.3 percent to $54.04.

Reinventing Stores

The company increased its per-share profit forecast for the year ending Jan. 29 to $2.34. It had projected $2.24 in May. Analysts expected $2.30. Last year, employees started using handheld mobile devices to process inventory coming into stores and help customers find items.

The results outperformed Lowe’s Co., the second-largest U.S. home-improvement retailer, which yesterday said profit in its fiscal 2011 will be less than it previously projected after comparable-store sales fell. Same-store sales slipped 0.3 percent in the second quarter, missing the Mooresville, North Carolina-based retailer’s forecast for a gain of 2 percent.

“Comp sales are night and day,” said Walter Todd, chief investment officer at Greenwood Capital Inc. “Home Depot has done a better job in this environment with a laser focus on customer service and reinventing its stores.” The firm, based in Greenwood, South Carolina, owns 139,000 Home Depot shares and doesn’t hold Lowe’s stock.

Home Depot rose $1.66, or 5.3 percent, to $33.12 at 4 p.m. in New York Stock Exchange composite trading. The shares have declined 5.5 percent this year. Lowe’s gained 41 cents, or 2.1 percent, to $20.09 and has tumbled 20 percent this year.

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

To contact the editor responsible for this story: Kevin Orland at korland@bloomberg.net

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