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Home Depot Profit Increases 19%

The retailer credits store renovations and efforts to improve service for driving sales higher in every category.

August 18, 2004|From Reuters

Home Depot Inc. on Tuesday reported a 19% rise in second-quarter profit as store renovations and efforts to improve service drove sales higher in every category.

The world's largest home improvement retailer raised its forecast for the year, and its shares rose 3%.

The company said that store renovations and innovative products were drawing consumers and that technology upgrades were speeding up sales transactions and enhancing finance management.

Home Depot is "doing the right things in the front of the store and the right things in the back of the store," FTN Midwest Research analyst Eric Bosshard said. "It's certainly a formula that's absolutely succeeding right now."

Atlanta-based Home Depot said net income rose to $1.5 billion, or 70 cents a share, from $1.3 billion, or 56 cents, a year earlier.

Excluding the effects of an accounting change, the company said it earned 71 cents a share. Analysts on average were expecting profit of 65 cents, according to Reuters Estimates.

Total sales rose 11% to $20 billion as sales at stores open at least a year, a key measure of retail health, gained 5%. Home Depot cited strength across all regions and said its average purchase rose 8% to $54.73, with growth in every selling category.

Home Depot finance chief Carol Tome said consumers were trading up to higher-priced ceiling fans and other goods.

"People want to invest in their homes, they're looking for the best products and are willing to spend money," she said.

Worker training programs also paid off, Tome added. "With knowledgeable associates, customers buy more," she said.

Home Depot said it gained market share in appliances and saw strength in lumber, plumbing and its supply business for professionals. Revenue from services rose 27%, led by installations of carpeting, roofing and kitchens.

Home Depot also said third-quarter same-store sales were "considerably ahead" of the second-period pace, and that higher prices of oil and other commodities were spurring interest in energy-efficient items.

The retailer, which is also planning a move into China, cited improvement in measures such as return on invested capital, operating margin and sales per square foot.

Home Depot said it now expected per-share earnings to rise 14% to 17%, up from its previous estimate of 10% to 14%.

On Monday, rival Lowe's Cos. posted an 18% rise in quarterly profit as same-store sales rose 5%.

Home Depot shares gained $1.12 to $35.10 on the New York Stock Exchange, while Lowe's rose 55 cents, or 1%, to $49.69.

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