Home Depot said Tuesday that second-quarter profit fell 7%, as the nation's biggest home-improvement retailer shuttered its Expo business and continued to be pinched by the recession.
Still, the company's adjusted results beat Wall Street's expectations, and it lifted its guidance for full-year earnings from continuing operations.
Home Depot earned $1.12 billion, or 66 cents a share, for the period ended Aug. 2. That's down from $1.2 billion, or 71 cents a share, a year earlier.
Excluding Expo-related charges, profit was 67 cents a share, topping analysts' forecasts for 59 cents a share, according to Thomson Reuters. Home Depot had announced in January that it planned to close its 34 Expo Design Centers.
Quarterly results also included an approximately $50 million tax benefit related to a favorable foreign tax settlement. The tax benefited boosted earnings about 3 cents a share.
Revenue dropped 9% to $19.07 billion, falling short of the $19.23 billion forecast of analysts polled.
Sales at stores open at least a year, known as same-store sales, slid 8.5%. Same-store sales are a key indicator of retailer performance because they measure growth at existing stores rather than newly opened ones.
Cost-cutting helped results, as the company said total operating expenses fell 8% to $4.56 billion from a year ago.
"Our business performed well in a down market, we captured market share and drove operating productivity," said Chairman and CEO Frank Blake said in a statement. Still, he added that concerns about the housing market, rising unemployment and the weak economy continue to pressure consumers.
Results were better than those of rival Lowe's low, which a day earlier reported second-quarter profit fell 19%, missing expectations, on weaker-than-expected sales. The No. 2 home-improvement retailer also narrowed its full-year profit outlook, in contrast to Home Depot.
The weak results helped send the market tumbling on Monday as investors worried about consumers' continuing tight-fistedness. A recovery in consumer spending is crucial for an economic recovery because it accounts for two-thirds of all U.S. economic activity.
At Home Depot, the average ticket fell 9.3%, to $52.25, but the number of customer transactions actually edged up 0.3%, a key figure, said Janney Montgomery Scott analyst David Strasser, because it is the first time since 2004 traffic was positive in the second quarter.
"We have to believe that this is the result of better advertising, a more sophisticated pricing strategy, and general improvements in the service levels at stores," said Strasser, who reiterated his "Buy" rating.
"We are buyers of Home Depot today, as we believe that the ongoing turnaround will provide offsets to the ongoing weak macro environment."
Home Depot lifted its 2009 earnings from continuing operations forecast to flat to up 7%. Adjusted profit is expected to fall by 15 to 20%. Its prior guidance was for a 7% dip in earnings from continuing operations.
The retailer backed its expectation for revenue to be down about 9%.
Analysts predict full-year net income of $1.44 a share on revenue of $65.4 billion.
Home Depot, which has more than 300,000 workers, ran 2,240 retail stores at quarter's end.