Home Depot reports loss of $54M, but beats estimates

ByAshley M. Heher, AP Retail Writer
February 24, 2009, 3:24 PM

CHICAGO -- The Home Depot hd, which has suffered under the weight of the collapsing housing market, reported a fiscal fourth-quarter loss of $54 million Tuesday, mostly due to its plan to shut its four smaller home-improvement brands.

But adjusted results topped analysts' estimates, the shares of the nation's largest home improvement chain climbed nearly 11%.

The retailer lost 3 cents a share during the quarter, compared with a profit of $671 million, or 40 cents a share, a year ago. Excluding charges related to the closings and other items, the Atlanta-based company earned 19 cents a share.

Last month Home Depot said it planned to close Expo Design Centers, YardBIRDS, Design Centers and HD Bath, a bath remodeling business. The company has been hurt as fewer customers are buying homes and spending money on repairs and remodeling.

Home Depot has said it plans to eliminate 7,000 jobs, or about 2% of its 300,000 workers. Most of the cuts affect workers at the four businesses being closed.

"We expect the home improvement market in 2009 will remain just as challenging as 2008, but we will continue to invest in our associates and stores to set a strong foundation for the long-term health of our company," said Chairman and Chief Executive Frank Blake.

There was little cause for optimism about the housing market after a widely watched index showed Tuesday that home prices tumbled by the sharpest annual rate on record in the fourth quarter. The Standard & Poor's/Case-Shiller U.S. National Home Price Index was down 18.2% from a year ago — largest drop in its 21-year history.

The dismal housing market also hurt Home Depot's rival Lowe's low, which said last week that its fourth-quarter profit fell 60% and revenue slid 4%.

At Home Depot, revenue for the period ended Feb. 1 slid 17% to $14.61 billion from $17.66 billion last year. Same-store sales sank 13% for the quarter. Same-store sales, or sales at stores open at least a year, are a key indicator of retailer performance since they measure growth at existing stores rather than newly opened ones.

Analysts, who generally exclude one-time factors, had forecast a fourth-quarter profit of 15 cents a share on revenue of $14.67 billion.

There was also one less week in the quarter compared with the prior-year period.

Investors were paying particular attention to Home Depot's gross margin, after Lowe's said it was forced to deeply discount its holiday offerings earlier than expected in the season to keep up with competitors. That cut into the company's profit.

But Home Depot didn't take such a hit, and was able to avoid marking down many of its products.

"We knew it was going to be a tough holiday season," said Chief Financial Officer Carol Tome. "We brought in the right level of inventory."

Barclays analyst Michael Lasser said the results would calm Wall Street nerves.

"(Home Depot's) gross margin performance indicates that (Lowe's) experience was more company-specific and we believe that it shows that the promotional environment for the home improvement sector will remain relatively resilient for the foreseeable future," he wrote to investors in a research note.

Home Depot expects 2009 profit from continuing operations to fall about 7%, which implies earnings of approximately $2.15 billion. The company anticipates full-year total sales down about 9%, or to about $64.9 billion. Analysts predict annual revenue of $66.41 billion. Meanwhile, Home Depot said it plans to open 12 stores.

For the year, the company's profit fell 49% to $2.26 billion, or $1.34 a share, down from $4.4 billion, or $2.37 a share. Earnings from continuing operations dropped to $2.31 billion, or $1.37 a share, compared with $4.21 billion, or $2.27 a share. Adjusted earnings from continuing operations were $1.78 a share.

Full-year revenue dipped 8% to $71.29 billion from $77.35 billion, while same-store sales slid 8.7%.

Home Depot shares climbed $1.96, or 10.5%, to close at $20.67.

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