Home De­pot’s post-hur­ri­cane boom has price

Storm sea­son takes toll on re­tailer’s bot­tom line

Las Vegas Review-Journal - - BUSINESS MARKETS - By Matt Townsend Bloomberg News

Home De­pot saw sales surge in the wake of this year’s bar­rage of hur­ri­canes, but the storms still took a toll on the re­tailer’s bot­tom line.

Even as cleanup and re­build­ing ef­forts helped the chain’s sales top an­a­lysts’ es­ti­mates, ex­penses re­lated to the storms re­duced op­er­at­ing profit by $51 mil­lion. Cus­tomers stocked up on less prof­itable ply­wood and gen­er­a­tors dur­ing the nat­u­ral dis­as­ters and that nar­rowed mar­gins, the com­pany said.

“Al­though nat­u­ral dis­as­ters have had a pos­i­tive im­pact on sales, their ef­fect on mar­gins has been less sat­is­fac­tory,” said Neil Saun­ders, a Glob­aldata Re­tail an­a­lyst.

Shares had been up 23 per­cent this year through Mon­day’s close. Shares gained $2.32, or 1.4 per­cent, to close at $168.06.

Rev­enue climbed 8.1 per­cent to $25 bil­lion, com­pared with an­a­lysts’ av­er­age es­ti­mate of $24.5 bil­lion. Profit rose to $1.84 a share, ex­ceed­ing the av­er­age $1.82 pro­jec­tion. That marked the 14th straight quar­ter Home De­pot has sur­passed pro­jec­tions.

Sales at stores open for more than a year — a key bench­mark for in­vestors — rose 7.9 per­cent, more than 2 per­cent­age points above es­ti­mates, ac­cord­ing to Con­sen­sus Metrix.

Home De­pot said the hur­ri­canes lifted same-store sales by about $282 mil­lion in the quar­ter, and those gains are ex­pected to surge in the fi­nal months of the year be­cause that’s when home­own­ers will start re­ceiv­ing in­surance checks for dam­age, the com­pany said.

The com­pany lifted its guid­ance for the full year, say­ing sales will be up about 6.3 per­cent. That’s a full per­cent­age point above pre­vi­ous pro­jec­tions. Profit will be about $7.36 a share, above the pre­vi­ous fore­cast of $7.29 a share, Home De­pot said.

The com­pany added it doesn’t ex­pect a tax pro­posal from House Repub­li­cans — which would re­duce the mort­gage in­ter­est that home­own­ers can deduct — to have a ma­te­rial im­pact on re­sults.

The bill would lower the de­duc­tion cap for mort­gages to $500,000 from $1 mil­lion. Only 22 per­cent of tax fil­ers use the de­duc­tion and about 5 per­cent of mort­gages are in ex­cess of $500,000, the com­pany said.

Pro­vi­sions in the House and

Se­nate tax bill won’t slow the U.S. hous­ing mar­ket, ac­cord­ing to chief fi­nan­cial of­fi­cer Carol Tome. Ag­gre­gate prices are still be­low where they were be­fore the re­ces­sion while the com­pany sees more mil­len­ni­als form­ing fam­i­lies and boost­ing de­mand. The com­pany ex­pects home val­ues to keep ris­ing for at least the next three years.

“The ru­mors of an im­pend­ing slow­down, we don’t see it,” Tome said in a call with an­a­lysts. “We look at the un­der­ly­ing data. We look at what hap­pens in our stores every day, and on our web­site, and we just don’t see it.”

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