Home Depot reports nearly 19 percent jump in 2nd quarter profit
Tuesday, August 17th 2004, 1:33 pm
By: News On 6
ATLANTA (AP) _ The Home Depot Inc., buoyed by robust sales, posted nearly a 19 percent jump in second-quarter profit, prompting the retail giant to raise its earnings outlook for all of 2004.
The results, released Tuesday, handily beat Wall Street expectations and sent the company's shares higher.
The nation's largest home improvement store chain said it earned $1.55 billion, or 70 cents a share, in the three months ending Aug. 1, compared to a profit of $1.30 billion, or 56 cents a share, in the same period a year ago.
Excluding the effect of an accounting change, Home Depot said it earned $1.57 billion, or 71 cents a share, in the quarter. Analysts surveyed by Thomson First Call were expecting earnings of 64 cents a share.
Revenue in the second quarter was $19.96 billion, an 11 percent increase from the $17.99 billion recorded a year ago.
``It was a very impressive performance in an environment where interest rates are rising and gas prices are rising,'' said Eric Bosshard, an analyst with FTN Midwest Research in Cleveland.
He said the Atlanta-based company's efforts to modernize its stores in the face of growing competition, improve customer service and better train employees is ``driving the Home Depot story.''
Chief executive Bob Nardelli said Home Depot will spend $2 billion this year on its store-modernization program, which includes technology upgrades.
Home Depot also has been looking to expand beyond its traditional markets.
In June, Home Depot said it plans to expand into China, which offers the company a chance to tap into a nearly $50 billion home improvement market. The company has not said how many stores it plans to open there or when it will open its first store in China.
The earnings results represented the first time in the company's 25-year history that it has recorded nearly $20 billion in sales in a three-month period, Nardelli said.
``The passion and entrepreneurial spirit is alive and well at The Home Depot,'' Nardelli said in a conference call with analysts and investors.
He said the company saw growth in several key markets, including San Diego, Philadelphia and Indianapolis. The company also is seeing more customers paying for Home Depot to install products for them, raising revenue for the company's in-home services division.
Home Depot raised its full-year earnings growth projections from 10 percent to 14 percent, to 14 percent to 17 percent. On the revised basis, it expects to earn $2.14 a share to $2.20 a share this year, compared to $1.88 a share last fiscal year.
Analysts surveyed by Thomson First Call expect $2.16 per share.
Home Depot also reiterated its previous full-year sales growth projections of 10 percent to 12 percent. That would amount to sales of $71.3 billion to $72.6 billion for the year, compared to $64.82 billion last fiscal year.
Shares of Home Depot rose $1.32, or 3.9 percent, to $35.30 in afternoon trading on the New York Stock Exchange.
The company, meanwhile, is working to get supplies to people affected by Hurricane Charley. Nardelli said 33 of the company's stores were in the path of the hurricane, which ravaged parts of Florida and the Southeast.
Home Depot said same-store sales increased 4.8 percent in the quarter, the number of customer transactions increased 2.6 percent and the average sales ticket rose 8.2 percent to $54.73. Same-store sales are sales at stores opened at least a year and are considered the best indicator of a retailer's health.
For the first six months of the year, Atlanta-based Home Depot said it earned $2.64 billion, or $1.18 a share, compared to a profit of $2.21 billion, or 96 cents a share, in the year-ago period. Six-month revenue was $37.51 billion, a 13.3 percent increase from the $33.10 billion recorded a year ago.
At the end of the second quarter, Home Depot operated 1,788 stores in the United States, Canada and Mexico. It has 300,000 employees.
The earnings news follows Monday's announcement by Home Depot's chief rival, Mooresville, N.C.-based Lowe's Cos. Inc., that it had an 18 percent jump in second-quarter income, though it missed Wall Street's estimates. Lowe's also boosted its earnings outlook based on what it called continuing strength in the nation's housing market.