Home Depot's Profit Hurt By Housing Meltdown
Home Depot said quarterly profit fell 66 percent as the U.S. housing meltdown hurt sales and it took a charge to close stores and curb expansion plans.
Shares of the world's largest home improvement retailer were down 3.5 percent in early New York Stock Exchange trade after rising soon after it released its results before the market opened.
"The company managed well in a difficult environment," Sanford Bernstein analyst Colin McGranahan said in a research note. Modest gross margin expansion was also a positive, he said.
Net income fell to $356 million, or 21 cents a share, in the first quarter ended May 4, from $1.05 billion, or 53 cents a share, a year earlier.
Results included a charge of $543 million to close 15 underperforming U.S. stores and scrap plans to open 50 stores that had been in the company's pipeline.
Excluding the charge, profit was 41 cents a share, compared with the analysts' average forecast of 37 cents, according to Reuters Estimates.
Sales fell 3.4 percent to $17.9 billion, exceeding analysts' estimates of $17.63 billion. Sales at stores open at least a year fell 6.5 percent.
Home Depot, which has stepped up investments to upgrade existing stores and hire more trade specialists, said its average purchase fell 2.8 percent to $57.36 for the quarter, while customer transactions were down 1.3 percent.
"The housing and home improvement markets remained difficult in the first quarter; in fact, conditions worsened in many areas of the country," Home Depot Chairman Frank Blake said in a statement.
Many retailers are slowing store growth this year as recession worries and higher prices for gasoline and food cut into consumer spending.
But the crumbling U.S. housing market has compounded troubles for Home Depot and smaller rival Lowe's as plummeting home values, slower sales and tighter credit curb demand for big-ticket renovations.
On Monday, Lowe's said first-quarter profit fell 18 percent while total sales declined 1.3 percent. The Mooresville, North Carolina, retailer cut its full-year earnings forecast.
The Home Depot results "corroborate assessments from Lowe's results yesterday -- the sector is bumping along the bottom, lagging housing turnover by several months," Goldman Sachs analyst Matthew Fassler said in a research note.
Atlanta-based Home Depot did not update its full-year earnings outlook ahead of its analysts meeting set for June 5. In early May, it said it expected per-share profit to fall as much as 24 percent this year.
Home Depot's shares were down $1.01 at $27.86. The stock has fallen 28 percent in the past year.