Home Depot Reports Fourth-Quarter Loss, Tops View

Top home improvement retailer Home Depot delivered stronger-than-expected quarterly results Tuesday as it held down expenses, sending its shares up 3 percent in pre-market trade.

The company plans to open fewer new stores and said per-share profit would fall for a third consecutive year in 2009 as the recession and softer U.S. housing market eat into sales.

Yet analysts said Home Depot was narrowing the performance gap with smaller rival Lowe's. Lowe's posted quarterly results that missed Wall Street estimates last week.

"They are really taking the fight back to Lowe's after languishing behind in key profit measures for about two years," said Brian Sozzi, an equity research analyst with Wall Street Strategies in New York.

"The guidance has been on the money, which has allowed Home Depot to beat earnings consensus strongly in the past four quarters," Sozzi said.

Home Depot is also cutting 7,000 jobs as it shutters its Expo Design Center chain and trims corporate costs.

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Home Depot posted a net loss of $54 million, or 3 cents a share, for the fourth quarter ended Feb. 1, compared with earnings of $671 million, or 40 cents a share, a year earlier.

The latest period included a pretax charge of $387 million tied to the Expo closures and a $163 million write-down of an investment.

Excluding those items, profit from continuing operations was 19 cents a share, better than analysts' average estimate of 15 cents a share, according to Reuters Estimates.

Sales fell 17 percent to $14.61 billion. Sales at stores open at least a year, an important measure, fell 13 percent, hurt by an extra week in the year-earlier quarter.

Excluding the calendar shift, same-store sales fell 11.5 percent. Home Depot said same-store sales for U.S. stores were down 9.2 percent. Last week, Lowe's said its same-store sales fell 9.9 percent.

Operating expenses at Home Depot fell 2 percent in the fourth quarter and inventory fell.

The U.S. housing slump and tight credit market has curtailed demand for big-ticket remodels that powered growth at Home Depot and Lowe's in recent years. Both retailers have trimmed corporate costs and curbed store openings.

Atlanta-based Home Depot said per-share earnings from continuing operations would fall about 7 percent over the next fiscal year. It plans to open 12 net new stores this year, compared with 40 opened in 2008, as capital spending falls to $1 billion.

The full-year outlook assumes no further share buybacks or any potential sales benefit from a U.S. economic stimulus package, Home Depot said.

Home Depot shares rose to around $19 in pre-market trade Tuesday from Monday's close of $18.71 on the New York Stock Exchange.

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