The Home Depot Inc., the world’s largest home improvement store chain, reported Tuesday a 14.8 percent drop in second-quarter profit as sales slid, particularly at stores open at least a year.
The results beat Wall Street expectations for continuing operations, but Chief Financial Officer Carol Tome warned during a conference call that Home Depot would reduce by nearly half the size of a previously announced plan to repurchase up to $22.5 billion in company stock if the sale of its wholesale distribution business falls through.
Later, she told The Associated Press she was “just trying to do the math” for an analyst who asked her about the issue. Tome said any reduction in the stock repurchase plan would be subject to board approval.
For the three months ended July 29, Home Depot said it earned $1.59 billion, or 81 cents a share, compared with a profit of $1.86 billion, or 90 cents a share, for the same period a year earlier.
The Atlanta-based company said earnings from continuing operations totaled $1.52 billion, or 77 cents a share, in the second quarter. On that basis, analysts surveyed by Thomson Financial were expecting earnings of 72 cents a share.
The results from continuing operations excludes Home Depot’s wholesale distribution unit, HD Supply, which the company has agreed to sell to private equity firms for $10.3 billion.
Revenue in the second quarter fell 1.8 percent to $22.18 billion, compared with $22.59 billion recorded in the same period a year earlier.
Sales at stores open at least a year, a key industry metric, fell 5.2 percent in the quarter, Home Depot said.
The company said it has been hurt by weakness in the housing market, which it expects to continue into next year.
“This is a difficult time and our performance reflects that,” Chief Executive Frank Blake said during a conference call with analysts on Tuesday.
Overall, Home Depot isn’t losing market share as fast as in the past, but Blake said the company’s goal is to gain market share.
Home Depot said last week that it may have to sell its HD Supply unit for less that originally planned. It hopes to close the sale later this year.
The company also said last week that it was lowering payments to shareholders who agree to sell their shares back to the company as part of a tender offer related to the stock repurchase plan.
Proceeds from the sale of HD Supply are expected to be used to partly fund the stock repurchase plan.
Blake declined Tuesday to provide further details about the HD Supply talks.
“I am not in a position to answer the very reasonable questions you may have about what is the likely outcome,” Blake said.
But Tome did address the impact on the stock repurchase program if the deal to sell HD Supply falls through.
“If we have no proceeds from HD Supply ... our recap would be reduced to $12 billion,” she said.
Tome told AP that when the company sized its stock repurchase plan, it did so based on the expected proceeds from HD Supply.
For the first half of its fiscal year, Home Depot said it earned $2.63 billion, or $1.34 a share, compared to a profit of $3.35 billion, or $1.60 a share, for the same period a year ago. Six-month revenue fell 3 percent to $40.73 billion, compared to $41.97 billion recorded a year earlier.
Home Depot reiterated that it expects earnings per share from continuing operations to decline by 12 percent to 15 percent for fiscal 2007. Consolidated earnings per share are expected to decline by 15 percent to 18 percent for fiscal 2007, Home Depot said.
The company said its fiscal 2007 outlook does not include the impact of a 53rd sales week. The company projects that the 53rd week will add approximately 3 cents to its earnings per share outlook for fiscal 2007.
Also, Home Depot’s earnings per share outlook does not include any impact of the sale of HD Supply or any earnings per share accretion arising from the company’s plan to repurchase up to $22.5 billion in stock.
The Home Depot operates 2,200 stores in the United States, Canada, Mexico and China.