Home Depot Raises Stock Repurchase Program by $500 Million

Home Depot Inc. (HD), the largest U.S. home-improvement retailer, raised its stock repurchase plan by $500 million for fiscal 2012, bringing the total to $4 billion.

The timing of the share repurchases will not have a material impact on the diluted earnings per share in that period, the Atlanta-based company said today in a statement.

Chief Executive Officer Frank Blake is working to boost shareholder returns by operating stores more efficiently, leading Home Depot to raise its operating margin forecast. The retailer is assigning more workers to help shoppers, using hand- held mobile devices to ring up purchases and adding lawn mower repair to spur sales, executives told analysts today during a conference call.

Blake said today that Home Depot expects to reach targets set in 2009 sooner than expected. The company will have 10 percent operating profit and 15 percent return on invested capital by the end of this fiscal year, and now projects an operating margin of about 12 percent in fiscal 2015 and a return on invested capital of about 24 percent.

The higher margins should be “welcomed by investors, but does not represent an upside to widely held expectations,” Colin McGranahan, an analyst at Sanford C. Bernstein & Co., wrote in a note today. He rates the stock as market perform, the equivalent of a hold recommendation.

Sales Increase

The company reiterated today it expects sales in fiscal 2012 to rise about 4.6 percent. Last month, the company forecast revenue this year will slow from the 5.9 percent gain in the first quarter because warmer-than-normal weather fueled early purchases of plants and gardening equipment.

Net income in the quarter ended April 29 increased 27 percent to $1.04 billion, or 68 cents a share, from $812 million, or 50 cents a year earlier. Excluding some items, profit was 65 cents a share, matching the average estimate of 25 analysts in a Bloomberg survey.

Home Depot rose 3.4 percent to $50.60 at the close in New York. The shares have advanced 20 percent this year.

To contact the reporters on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net; Lauren Coleman-Lochner in New York at llochner@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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