Log In | Register
CHICAGO — Home Depot Inc. said Wednesday that its full-year earnings from continuing operations may come in better than previously forecast, thanks to a combination of individual homeowners spending more and stronger overall sales.
The nation's largest home improvement chain issued the rosier forecast weeks after smaller rival Lowe's Cos. raised its full-year outlook after reporting its first-quarter results in mid-May.
"We are lifting the guidance today because of our year-to-date performance," said Chief Financial Officer Carol Tome. "But we believe the back half will remain challenging. We aren't out of the woods."
Atlanta-based Home Depot, which held its annual investor meeting on Wednesday, expects earnings per share from continuing operations to be flat to down 7 percent. In February, the retailer forecast a 7 percent decline.
Home Depot also raised its forecast for adjusted earnings per share. It now expects them to fall 20 percent to 26 percent, compared with its previous outlook for a 26 percent decline.
The retailer maintained its sales outlook, saying it expects sales to fall about 9 percent, which would imply sales of about $64.87 billion.
Analysts polled by Thomson Reuters, whose estimates generally exclude one-time items, predict full-year profit of $1.40 per share on sales of $65.27 billion.
Analysts said the outlook hike was expected after Lowe's boosted its guidance.
"We do not see this news as a significant surprise, rather the 'good news' coming out of first quarter 2009 upside delayed until now," Stifel Nicolaus & Co. analyst David Schick told investors in a research note.
In 2008, Home Depot earned $2.31 billion, or $1.37 per share from continuing operations. Its adjusted earnings from continuing operations were $1.78 per share. The new forecast implies 2009 earnings from continuing operations of $1.27 to $1.37 per share and adjusted earnings from continuing operations of $1.32 to $1.42 per share.
Home Depot reiterated its forecast for same-store sales to decline in the high single digits.
Same-store sales, or sales at stores open at least a year, are a key indicator of retailer performance since they measure growth at existing stores rather than newly opened ones.
Home Depot reported a better-than-expected first quarter as performance improved through April.
At the time, Home Depot said it was being "prudent" by waiting to change its outlook until executives saw how sales fared throughout spring and especially on Memorial Day Weekend — the biggest selling time for the chain.
"We didn't lift our guidance at that time because of mixed economic signals and because May is such a critical selling month for us," Tome said. "The economic signals remain mixed but our results in May were very good."
Executives said May's results were much better than April's, and June appeared to be strong, as well.
Tome said the company also buoyed by the metric it uses to assess the housing market — the ratio of private, fixed residential investment to the nation's gross domestic product. That figure, now 2.7 percent, is at a 60-year low.
"Could it go lower? Sure," Tome said. "But it seems to us that the bulk of the contraction is behind us."
That bodes well for business going forward.
Home Depot shares rose 4 cents to close at $24.39 Wednesday.
