By Dhanya Skariachan
Aug 20 A recovery in the U.S. housing market
helped boost Home Depot Inc's quarterly profit and sales
above analysts' estimates, prompting the world's largest home
improvement chain to raise its outlook for the fiscal year.
The U.S. retailer also reported its first double-digit rise
since 1999 in sales at stores open at least a year and had the
highest quarterly transaction count in its history, Chief
Executive Officer Frank Blake said on Tuesday.
Sales were strong across the country, Blake added.
The news, which came just days after data showed that U.S.
housing starts rose 5.9 percent in July, gave more evidence that
the market for homes was healing after years of weakness.
"These stronger results demonstrate the sales leadership of
the housing/home improvement segment and Home Depot's strong
positioning and execution within it," said Credit Suisse analyst
Gary Balter. He said he believed the company's future sales
would also beat estimates as the housing recovery advances.
A bubble in the U.S. housing market was at the core of the
2007-2009 financial crisis. During the downturn, Home Depot's
sales at established stores fell more than 20 percent in such
markets as Florida and California.
In recent quarters, housing has rebounded in those markets
and other states where Home Depot has a heavy presence, such as
Arizona and Nevada. In May, the company said its sales to
contractors and professional customers increased faster than
those to individual homeowners and other shoppers for the first
time since 2008.
"In 2008, the consumer was really focused on core repair and
maintenance," Chief Financial Officer Carol Tome said in an
interview. "Fast-forward to 2013: Home prices are better, and as
consumers start to see their home price appreciate, they start
to view their home as an investment and not an expense."
Home Depot shares, which have outperformed the Standard &
Poor's 500 Index and Dow Jones Industrial Average
so far this year, were unchanged at $75.21 on Tuesday afternoon.
At least one analyst recommended selling the stock.
"While we see continued near-term margin improvement on
strong cost control, we think rising interest rates threaten
housing turnover, limiting sales growth," said S&P Capital IQ
analyst Michael Souers, who believes Home Depot shares are
expensive at current levels.
But Tome said: "We have got a long way to grow" in terms of
Net earnings rose to $1.80 billion, or $1.24 a share, in the
second quarter ended Aug. 4 from $1.53 billion, or $1.01 a
share, a year earlier. Analysts on average were expecting a
profit of $1.21 a share, according to Thomson Reuters I/B/E/S.
Sales rose 9.5 percent to $22.5 billion, topping the
analysts' average estimate of $21.8 billion. Sales at stores
open at least a year rose 10.7 percent, including an 11.4
percent increase in the United States.
For the year, the company raised its earnings forecast to
$3.60 a share from $3.52. It said it expected a sales rise of
about 4.5 percent, up from previous expectations of a 2.8
Home Depot has also benefited from its own efforts to
improve customer service and attract shoppers with more
compelling prices than its rivals. It has tailored its marketing
to local areas, centralized distribution centers and shifted
more workers to jobs where they serve customers directly.
As a result, Home Depot has gained market share from rival
Lowe's Cos, which is due to report results on Wednesday.