Home Depot, Target rely on cost cuts; TJX sees profit rise

NEW YORK -- Home Depot and Target said Tuesday that second-quarter profits and sales fell but beat expectations as consumers continued to pinch pennies. Breaking the mold: Discount retail operator TJX reported higher profit and sales.

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.

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.