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Home Depot Raises Full-Year Forecast on Increased Spending

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Home Depot Fourth-Quarter Profit Rises 72%
A flag flies outside a Home Depot Inc. store in Atlanta, Georgia. Photographer: Erik S. Lesser/Bloomberg

Feb. 22 (Bloomberg) -- Home Depot Inc., the largest U.S. home-improvement retailer, raised its full-year earnings forecast and posted a 72 percent gain in fourth-quarter profit after selling more appliances, windows and snow-removal equipment.

Net income increased to $587 million, or 36 cents a share, in the quarter ended Jan. 30, Atlanta-based Home Depot said today in a statement. Analysts had predicted 31 cents, based on the average of 21 estimates compiled by Bloomberg.

The average purchase jumped the most in 4 1/2 years, by 2.6 percent to $51.31, amid a recovery in U.S. consumers’ confidence. Customers bought holiday decorations, tools and snow blowers, as well as energy-efficient windows and doors before the Dec. 31 expiration of a tax credit, Craig Menear, executive vice president of merchandising, told analysts on a conference call. Operating expenses declined 1.9 percent.

The results point to “strong execution in both merchandising and expense management,” Colin McGranahan, an analyst at Sanford C. Bernstein & Co. in New York, wrote today in a note to clients. He rates the shares as “market perform.”

Revenue rose 3.8 percent to $15.1 billion. Analysts projected sales of $14.8 billion in average.

Consumers ‘Cautious’

“Consumer confidence is helping,” Chief Financial Officer Carol Tome said today in a telephone interview. Homeowners purchased discounted appliances on Black Friday, the day after Thanksgiving, while restraining spending on kitchen remodeling. “Looking to 2011, consumers are still cautious about big-ticket items,” she said.

Home Depot slipped 39 cents to $38.09 at 4 p.m. in New York Stock Exchange composite trading. The shares have advanced 8.6 percent this year.

Confidence among U.S. consumers rose in February to the highest level in three years as Americans became more optimistic about their incomes and the economy.

The Conference Board’s index of sentiment increased to 70.4, the highest since February 2008, from 64.8 the prior month, figures from the New York-based private research group showed today.

Home Depot increased its full-year earnings forecast to a gain of as much as 9.5 percent to $2.20, excluding share repurchases, up from an increase of as much as 9 percent predicted in December.

The percentage gain in the average purchase last quarter was the biggest since a 4.2 percent rise in the second quarter of 2006, according to Ron DeFeo, a company spokesman.

The company reported net income of $342 million, or 20 cents a share, in the year-earlier quarter.

(Home Depot executives discussed financial results on a conference call today. To hear the replay, click HD US <Equity> EVT <GO> or http://earnings.homedepot.com)

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: Robin Ajello in New York at rajello@bloomberg.net.

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