HOME DEPOT’S quarterly results beat Wall Street estimates as a warm winter boosted sales at the world’s largest home improvement chain by pulling some spring demand forward.
The retailer also gave a better-than-expected profit outlook for the current year just days after a report showed US homebuilder sentiment had risen in February to its highest level in more than four years. That report raised hopes that the housing market was stabilising.
The results from Home Depot drove its shares up 3.3 per cent to $48.26 yesterday morning, and made some analysts more optimistic about the retailer’s prospects.
The most important part of Home Depot’s strong performance was that it is occurring prior to any sustained housing recovery, said Credit Suisse analyst Gary Balter.
The company’s earnings power would rise significantly once the housing market and the economy improved, Mr Balter added.
Besides the warm winter, Home Depot benefited from having more centralised distribution centres and from recent efforts to shift more employees to jobs where they serve customers directly.
It has also been cutting costs more quickly than smaller rival Lowe’s, which is due to report its results next week.
For the current year, Home Depot forecast earnings of about $2.79 a share, while analysts expected $2.77.
Mr Balter and other analysts said the outlook was conservative.
“This guidance could be construed as not enough,” Janney Capital Markets analyst David Strasser said, but added that the company had a history of being conservative in its outlook.
Home Depot’s quarterly sales rose 5.9 per cent to $16.01 billion in the fourth quarter ended on January 29th, well ahead of the analysts’ average estimate of $15.51 billion compiled by Thomson Reuters I/B/E/S.
Sales at stores open at least a year rose 5.7 per cent globally, including a 6.1 per cent rise in the United States.
Warm temperatures in many parts of the US helped same-store sales rise by 2 to 2.5 percentage points, Mr Strasser said, adding that demand was very strong for flooring products. – (Reuters)
