Bloomberg News

Home Depot Profit Tops Estimates as Housing Market Heals

November 13, 2012

Home Depot Profit Rises 1.4% as Customer Traffic Increases

Customers walk towards a Home Depot Inc. store in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

Home Depot Inc. (HD:US), the largest U.S. home-improvement retailer, posted third-quarter profit that topped analysts’ estimates as the recovering U.S. housing market prompted customers to spend more on home repairs.

Net income climbed 1.4 percent to $947 million, or 63 cents a share, from $934 million, or 60 cents, a year earlier, the Atlanta-based company said today in a statement. Excluding some items, profit was 74 cents. The average estimate (HD:US) of 25 analysts surveyed by Bloomberg was 70 cents. Sales rose 4.6 percent to $18.1 billion, topping the $17.9 billion average estimate.

The U.S. housing market is healing, with new-home sales rising to the fastest pace in two years and construction starting at the fastest rate in four years. The rebound has helped sales at Home Depot locations open at least a year gain 4.2 percent, the sixth straight quarterly increase (HD:US), as customers visited more often and spent more per trip.

Home Depot “did an excellent job driving its sales growth with lower promotions,” John Tomlinson, an analyst at ITG Investment Research in New York, said today in an e-mail. “There is no doubt improvements in housing turnover and home prices are also positively impacting its sales trends.”

Home Depot rose 3.6 percent to $63.38 at the close in New York, the biggest gain since Dec. 20. The shares have climbed 51 percent this year.

Housing Rebound

New-home sales in September climbed 5.7 percent to a 389,000 annual pace, the most since April 2010, according to the Commerce Department. Housing starts that month jumped 15 percent to the fastest rate since July 2008, a report last month showed. Beginning construction rose to an 872,000 annual rate, exceeding all forecasts in a Bloomberg survey, Commerce Department figures showed.

Americans’ real estate holdings have risen in value for two straight quarters, making them worth $730 billion more than at the end of 2011, Federal Reserve data show. More than 1.3 million homeowners who had owed more than their property was worth have moved above the break-even point on their homes, according to CoreLogic of Santa Ana, California. U.S. home prices rose 4.6 percent in August from a year earlier, according to the service.

Those rising property values are bolstering household finances and spurring the consumer spending that accounts for 70 percent of the economy.

Sales this year will gain 5.2 percent, Home Depot said today. That’s up from a previous projection for a 4.6 percent gain. Profit excluding the effect of closing seven stores in China will be $3.03 a share, up from a previous forecast of $2.95 and topping the $2.98 average estimate (HD:US).

Customer Traffic

Home Depot’s average transaction value in the third quarter rose 2.9 percent to $54.55 while the number of purchases climbed 1.7 percent to 331 million.

The earnings reflect “the start of the path toward the healing of the housing market,” Chief Executive Officer Frank Blake said in the statement.

The company plans to buy back about $700 million in shares in the fourth quarter, bringing its total repurchases for the year to about $4 billion, Home Depot said.

Hurricane Sandy, which slammed into the East Coast two weeks ago, will result in a sales boost similar to the one provided by Hurricane Irene, which added about $360 million in sales last year, executives said today on a conference call.

Lowe’s Cos. (LOW:US), the second-biggest home improvement retailer, plans to report third-quarter results Nov. 19.

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • HD
    (Home Depot Inc/The)
    • $90.27 USD
    • 0.89
    • 0.99%
  • LOW
    (Lowe's Cos Inc)
    • $53.7 USD
    • 0.57
    • 1.06%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus