Better weather sees good gains in quarter for Home Depot
HOME Depot, the largest home-improvement retailer in the US, posted secondquarter profit that topped analysts’ estimates, and raised its forecast for the year as sales of seasonal merchandise rebounded. The shares gained.
Net income in the three months through August 3 rose 14% to $2.05bn, or $1.52 a share, from $1.8bn, or $1.24, a year earlier, the Atlanta-based company said yesterday. The average of 25 analysts’ estimates compiled by Bloomberg was $1.44.
CEO Frank Blake has focused Home Depot on boosting sales from existing locations and investing in e-commerce, rather than opening new stores. Secondquarter revenue gained 5.7% to $23.8bn, topping analysts’ average estimate of $23.6bn, helped by improved weather and rising home prices that are spurring consumers to spend on renovations.
Profit this year will be $4.52 a share, including the benefit of share repurchases, Home Depot said. The company had forecast $4.42.
Home Depot rose 3.3% to $86.35 at 6.36am in New York yesterday. The shares gained 11% in the 12 months to the close on Monday. That compares with a 15% increase for Lowe’s and a 19% rise for the Standard & Poor’s 500 Index.
A harsh winter and late spring in the US this year delayed purchases of seasonal items such as landscaping materials, hurting Home Depot’s results in the first quarter. Sales in those categories rebounded in the second quarter, Mr Blake said in yesterday’s statement.
Same-store sales, considered an important measure of performance because only established stores are counted, rose 5.8%. Analysts expected a gain of 4.4%, according to Consensus Metrix.
Rising housing prices have prompted consumers to spend more on their homes, helping both Home Depot and Lowe’s, which reports second-quarter results today. While values have been consistently gaining for more than two years, the growth slowed to a 4.4% advance last quarter from an increase of 8.3% in the first quarter, according to the National Association of Realtors.
Price appreciation is moderating as more properties are listed for sale and buyer demand slows, the group said.
Limited availability of credit, sluggish wage gains and higher interest rates are also proving to be obstacles to the continued housing recovery. Pending sales of previously owned homes fell 1.1% in June, the estate agent group said last month.
Home Depot has bought back $3.5bn in shares this year, and said it will repurchase another $3.5bn in 2014.