By Dhanya Skariachan
Feb 25 Winter storms and record cold in much of
the United States hurt Home Depot's fourth quarter sales
of everything from lumber to building materials.
But the world's largest home improvement chain expects to
benefit this spring when Americans begin to repair snow damaged
homes and gardens.
"We know firsthand that many homeowners have some major
repairs ahead of them which suggest we should have a great
spring selling season," Chief Financial Officer Carol Tome said
on Tuesday, adding that sales at stores open at least a year
were up so far in February despite harsh winter weather.
The comments came after Home Depot missed sales estimates
and relied on tight cost controls to beat profit estimates in
the fourth quarter, which ended Feb. 2.
Some Wall Street analysts said the retailer held up pretty
well in the quarter plagued by inclement weather in its key U.S.
market and weakness in the Canadian currency.
Home Depot shares were up 2.4 percent at $79.77 Tuesday on
the New York Stock Exchange.
Home Depot faced tough comparisons with the final quarter of
its previous financial year when repairs and rebuilding after
Superstorm Sandy boosted sales.
In the latest fourth quarter, overall sales fell 3 percent
to $17.70 billion, missing the analysts' estimate of $17.91
billion. Sales at stores open at least a year rose 4.4 percent,
including a 4.9 percent rise at its U.S. stores.
The latest period had one week less than the prior-year
RBC Capital Markets analyst Scot Ciccarelli said he was
cheered by the retailer's sales at its established stores and
recommended Home Depot over rival Lowe's, due to report
results on Wednesday.
Others worried whether the sales weakness at Home Depot
indicated the recent U.S. housing recovery was losing momentum.
Severe cold weather and a shortage of houses on the market
had pushed U.S. home resales to an 18-month low in January.
"We believe weather had a modest impact, but affordability
remains stretched, household formation soft and younger people
are not in the market due to higher education debt," wrote
Janney analyst David Strasser, who has a "neutral" rating on the
Home Depot CEO Frank Blake expects the housing recovery to
continue, but does not see all housing metrics sustaining 2013
growth rates. He expects home prices to rise but at a lower
Home Depot was faster to begin cutting costs than its
smaller rival Lowe's Cos Inc during and after the most
recent U.S. recession.
It has particularly gained from its move to have more
centralized distribution centers. It managed to cut total
operating costs by 4 percent in the quarter.
Home Depot has also managed inventory tightly and found
creative ways like using less energy in its stores to save
money. It also has benefited from its slower expansion strategy.
Under Blake, Home Depot closed smaller, secondary stores and
upgraded service and products in its core "big box" stores to
win back market share from Lowe's.
Net earnings were $1.01 billion, or 73 cents a share,
compared with $1.02 billion, or 68 cents a share, a year
earlier. Analysts were looking for a profit of 71 cents a share,
according to Thomson Reuters I/B/E/S.
Some analysts had raised concerns about inclement weather
hurting traffic to its stores in the United States in December
For the current fiscal year, the company expects earnings of
$4.38 a share on sales growth of about 4.8 percent. It sees
same-store sales, or sales at stores open at least a year,
rising about 4.6 percent.