GO
Loading...

Home Depot Reaps Housing Recovery's Effects

Getty Images

Home Depot reported higher-than-expected quarterly results and raised its sales and profit outlook for the year as the world's largest home improvement chain benefited from a nascent recovery in the U.S. housing market.

The news on Tuesday boosted Home Depot shares in pre-market trading. (Click here to track the company's shares in pre-market trading.)

A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis. During the downturn, Home Depot's sales at established stores fell more than 20 percent in such markets as Florida and California. In recent quarters, the company has gotten a boost as housing markets have rebounded in regions where it has a heavy presence.

"In the first quarter, we saw less favorable weather compared to last year, but we continue to see benefit from a recovering housing market that drove a stronger-than-expected start to the year for our business," Chief Executive Officer Frank Blake said.

(Read More: Retailers in the Headlines, but Focus Is on Fed)

Despite cooler-than-usual weather in many parts of the U.S. at the start of the spring selling season, Home Depot's sales rose 7.4 percent to $19.12 billion in the first quarter ended on May 5. That topped the analysts' average estimate of $18.68 billion.

Better pricing and customer service have helped Home Depot take market share from smaller rival Lowe's. The industry leader has also gained from tailoring its marketing to local areas, centralizing distribution centers and shifting more workers to jobs where they serve customers directly.

Sales at Home Depot stores open at least a year rose 4.3 percent, including a 4.8 percent increase in the U.S. Many on Wall Street expect same-store sales from Lowe's to be weaker than those from Home Depot for the 16th straight quarter when the smaller chain reports results on Wednesday.

Under Blake, Home Depot was also quicker than Lowe's to cut costs in the years after the housing collapse.

Net income in the first quarter rose to $1.2 billion, or 83 cents a share, from $1 billion, or 68 cents a share, a year earlier. Analysts on average had forecast a profit of 77 cents a share, according to Thomson Reuters.

For the year, the company now expects earnings of $3.52 a share, up from its prior outlook of $3.37. It forecast a sales increase of about 2.8 percent, up from previous expectations of a 2 percent rise.