Housing woes continue to dog Home Depot

Housing woes continue to dog Home Depot
By Victoria Kim
Copyright The Financial Times Limited 2007
Published: August 14 2007 14:25 | Last updated: August 14 2007 15:01


Home Depot on Tuesday reported weak second-quarter earnings, confirming its earlier outlook, and said it expected grim market conditions to continue into 2008.

Poor sales led the second-largest US retailer to report earnings down 15 per cent to $1.6bn, or 81 cents per share, from $1.9bn or 90 cents per share a year earlier. Sales in stores that were open for at least a year fell by 5.2 per cent.

The worst depression in the housing market in 16 years continues to present a “tough selling environment” for the home improvement retailer, chairman and chief executive Frank Blake said.

“We believe the housing and home improvement markets will remain soft into 2008.”

The company reiterated its outlook of a 12 to 15 per cent fall in earnings in fiscal year 2007.

The Atlanta based company, along with home-builder DR Horton and home appliances retailer Sears, last month issued profit warnings, confirming investors’ fears that the housing market downturn was hurting profits for a range of companies.

Home Depot also appeared to be hit by the credit crunch caused by mortgage market woes, when it announced last week the sale price for its wholesale unit was being renegotiated and might be lowered from $10.3bn. The company announced in June it was selling HD Supply and has been in talks with private equity groups.

The supply unit, which was built through acquisitions by the former chief executive Bob Nardelli before he was ousted in January, generated earnings of $66m or 3 cents per share.

Excluding profits from the unit pending sale, the company’s earnings were $1.5bn or 77 cents per diluted share, above analysts’ expectations at 72 cents per share.

Home Depot shares were down 1.5 per cent at $34.71 in early trade