Home Depot Profit Falls, but Beats Street View

Home Depot reported a higher-than-expected quarterly profit Tuesday as it held down costs in the face of lower sales and a weak economy, sending its shares up 3 percent.

The world's largest home improvement retailer said it expected a steeper drop in full-year sales as the U.S. housing slump and difficult economic conditions hurt demand.

"Being able to achieve expectations in this environment is no small feat," Credit Suisse analyst Gary Balter said in a research note.

"Hardline retail stocks have historically begun their recoveries when expectations begin to be achieved, and this may be happening for Home Depot and Lowe's," he added.

On Monday, Lowe's topped earnings expectations as demand for hurricane-related goods and outdoor products helped offset weakness in big-ticket sales.

At Home Depot, earnings fell 31 percent to $756 million, or 45 cents a share, for the third quarter ended on Nov. 2, down from $1.1 billion, or 60 cents a share, a year earlier.

Analysts expected 39 cents a share, according to Reuters Estimates.

Sales fell 6 percent to $17.8 billion.

Sales at stores open at least a year, an important retail measure, fell 8.3 percent.

Better Margins

Gross margin improved to 33.7 percent from 33.4 percent.

Though Home Depot provided no detail in its initial release, the company has eliminated margin-eroding promotions in recent months even as it lowered prices of basic goods.

Rich Pedroncelli / AP

Home Depot has posted quarterly profit declines for the past two years as falling home values and tighter credit led consumers to put off pricey projects such as kitchen remodels.

But sales of some basic repair goods have held up as consumers maintain their homes.

As the housing downturn hurt results, Home Depot has also closed unprofitable stores and pared jobs in some areas such as human resources and redirected savings into store maintenance and staffing.

The Atlanta retailer said it now expects total sales to fall as much as 8 percent this year, steeper than the 5 percent drop it forecast in August.

It said it still expected per-share profit from continuing operations to decrease about 24 percent this year.

Shares of Home Depot , a component of the Dow Jones Industrial Average, were up 70 cents to $20.70 in premarket trading.

(Click here to find out how Home Depot and other retailers are trading ahead of the US market open)

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