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Home Depot Sees Per-Share Profit Falling This Year

Home Depot , the world's largest home improvement store chain, said Wednesday it will pump $2.2 billion into improving its business this year amid internal projections that show overall sales will grow only slightly and earnings per share will fall.

The Atlanta-based company, faced with a slowing housing market, announced its priorities and outlook as it prepared later in the day to hold its annual investor conference.

Home Depot said it expects for all of fiscal 2007 to see a total sales growth of 0% to 2%, sales growth at stores open at least a year in the negative mid-single-digit area and an earnings per share decline of 4% to 9%.

Including the effect of a 53rd week in its fiscal year, consolidated sales are expected to increase by 1% to 2%, and earnings per share are expected to decline by 3% to 8%, Home Depot said.

Chief Executive Frank Blake said the company does not expect residential construction and the housing market to improve until late in the second half of 2007 or early 2008.

To improve its business, Home Depot said it will invest $2.2 billion this fiscal year in key priorities. The investment includes $1.6 billion in capital spending and $600 million in expense.

Home Depot said it will open 115 new stores this year.

The stock fell 0.5% in German trading.

New Merchandise and More Technology

Home Depot said its goals this year are focused on associated engagement, product excitement, product availability, shopping environment and cultivating the professional customer.

Home Depot said it will recruit master trade specialists, simplify its staffing model, use more technology to aid customer service and redesign employee compensation and reward plans.

It also will invest in new merchandise and review its pricing strategies. Home Depot added that it will spend money on loyalty programs, a pro bid room to handle large customer orders with volume discounts, direct ship programs, credit programs and other specialty sales initiatives.

Beyond 2007, the company believes that investments made in its retail business will allow sales in the retail business to return to above market growth rates.

Home Depot said that coupled with its commitment to share repurchases, the company anticipates earnings per share growth of more than 10% annually in future years.

It projected that beyond 2007 it will see an annual sales growth of roughly 5%, annual earnings growth greater than 5% and annual earnings per share growth of 10% or more.

Home Depot operates 2,163 stores in the United States, Canada, Mexico and China.

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