Tags: home depot | earnings | profit | houses

Home Depot Profit Tops Estimates as Americans Spend on Homes

Tuesday, 19 May 2015 07:51 AM

Home Depot Inc. posted first-quarter profit that topped analysts’ estimates as Americans boosted spending during the retailer’s most important selling season.

Profit in the three months through May 3 was $1.16 a share, excluding some items, the Atlanta-based company said Tuesday in a statement. The average of analysts’ estimates compiled by Bloomberg was $1.15.

Home Depot benefited from the continued rise of U.S. housing prices as well as the early arrival of warm weather, which spurred Americans to work on their homes’ exteriors. The spring is Home Depot’s biggest revenue generator — even more important than Christmas — and the retailer has worked to make it a promotional blitz on par with the holiday shopping season.

“We had a stronger-than-expected start to the year as we experienced a more normal spring across much of the country and continued recovery of the U.S. housing market,” Chief Executive Officer Craig Menear said in the statement.

Despite the first-quarter performance, Home Depot’s shares slipped after its forecasts for the remainder of the year caused doubts about whether the strength will continue. The company projected profit per share this year will be $5.24 to $5.27. While that’s up from a previous forecast for as much as $5.17, it includes the benefit of a favorable settlement of a tax audit, and the low end of the range assumes that the U.S. dollar will remain at current exchange rates.

The stock, which had outperformed its main rival and the broader market so far this year, fell 1.1 percent to $113 at 6:30 a.m. in early trading in New York. Home Depot had gained 8.9 percent this year through Monday, compared with a 6.2 percent increase for Lowe’s Cos. and a 3.4 percent advance for the Standard & Poor’s 500 Index.

Strategy Shift

Menear, a longtime Home Depot executive, took over for retiring CEO Frank Blake in November. Under Blake, the chain shifted from seeking growth through store openings to boosting the performance of current locations and the Web. That proved to be a prescient move as many retailers are now closing stores or shrinking them while people buy more online.

Same-store sales, a key yardstick of success in retail, rose 6.1 percent in the quarter. Analysts projected a gain of 5.5 percent, according to Consensus Metrix. Total revenue rose 6.1 percent to $20.9 billion, topping projections of $20.8 billion.

First-quarter net income rose 15 percent to $1.58 billion, or $1.21 a share, from $1.38 billion, or $1, a year earlier.

Of all the housing data points, the world’s largest home-improvement chain cares most about residential real estate prices. That’s because America’s 74 million homeowners spend more on their houses when they think their dwellings are worth more, Home Depot executives say.

The median price of a single-family home rose 7.4 percent in the first three months of the year, according to the National Association of Realtors. Prices climbed in 85 percent of U.S. metropolitan areas, the group said.

© Copyright 2017 Bloomberg News. All rights reserved.

   
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Home Depot Inc. posted first-quarter profit that topped analysts' estimates as Americans boosted spending during the retailer's most important selling season.
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2015-51-19
Tuesday, 19 May 2015 07:51 AM
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