Home Depot looks to cash in on repair spending

ATLANTA (Reuters) - As falling home values lead homeowners to think twice about renovating, Home Depot Inc (HD.N) is making more of a push to go after upkeep dollars as consumers take on smaller jobs to maintain their homes, the retailer's chief financial officer said on Tuesday.

"We know that repair and remodel is important," Carol Tome said in an interview. "You'll see us put more emphasis on those categories" with store displays this year, she said.

"We'll go after our fair share" of tax-rebate dollars consumers are due to receive under the U.S. government's stimulus package, she added.

The top home improvement retailer said that per-share profit could fall as low as 24 percent this year as the softer U.S. housing market cuts into sales. Home Depot curbed its capital spending for this year and plans to open fewer stores.

The pullback in big-ticket projects has hit Home Depot and rival Lowe's Cos (LOW.N) hard.

In the fourth quarter, categories such as special-order kitchens, windows and roofing had double-digit sales declines in most regions, Home Depot said.

At the same time, Home Depot noted some strength in repair and remodel categories as tools and some plumbing products outperformed the company average in the quarter.

Tome said many consumers are suffering through "an emotional overhang" as they see home prices fall and wonder whether investing in major remodels is worthwhile. Reduced credit is also a problem, she said.

Prices of existing U.S. single-family homes slumped 8.9 percent last year, according to the S&P/Case-Shiller home price index released on Tuesday. That year-over-year fall was the largest in the 20-year history of the index.

In order for that big-ticket spending to come back, prices may have to decline even more, especially for existing homes, Tome said. "You've got an inventory problem that has to be dealt with," she said.

To conserve cash, Home Depot is pulling back on some projects in existing stores, such as the installation of mezzanine levels in appliance departments, Tome said. The retailer also said it would stop selling pet goods and Halloween decorations this year.

Home Depot said its appliance market share rose to 11.8 percent in the fourth quarter from 10.8 percent a year earlier.

"The largest retailer of appliances is Sears (SHLD.O) and they are really losing share," according to industry data, Tome said.

Tome noted that the industry's competitive landscape was changing as tougher times forced some smaller home improvement operators out of business.

"That should be good for us, but we have to remember that demand is shrinking," Tome said.

(Reporting by Karen Jacobs)