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Home Depot posts higher profit on strong sales

The Home Depot Inc., the nation's largest home improvement store chain, reported a more than 14 percent jump in second-quarter earnings on strong sales.
/ Source: The Associated Press

The Home Depot Inc., the nation’s largest home improvement store chain, said Tuesday its second-quarter earnings jumped more than 14 percent on strong sales.

The company also increased its earnings growth guidance and affirmed its sales growth guidance for the year.

The results, announced before the market opened, beat Wall Street expectations and followed good news the day before from chief rival Lowe’s Cos., which reported a 20 percent jump in second-quarter profit on a 17 percent rise in sales.

The results by Home Depot and Lowe’s came despite rising energy prices and higher interest and mortgage rates.

“Consumers have really said they want to invest more money in their homes despite that challenge,” said Eric Bosshard, an analyst with FTN Midwest Research in Cleveland. “Clearly, it’s a strong time in the home center business.”

Still, Home Depot shares fell 56 cents, or 1.4 percent, to $41.05 in early trading Tuesday on the New York Stock Exchange, as the Commerce Department reported that construction starts on new homes and apartments fell 0.1 percent in July, a possible sign that the red-hot housing market is beginning to cool off.

Chief executive Bob Nardelli told analysts in a conference call Tuesday that Home Depot over time plans to increase its business catering to professional contractors, though he was quick to point out that the company has worked hard to appeal to a broad customer base.

“We will never lose our focus on the core,” Nardelli said.

He cited customer surveys that show customer service has improved at Home Depot stores.

Atlanta-based Home Depot said it earned $1.77 billion, or 82 cents a share, for the three months ending July 31, compared to a profit of $1.55 billion, or 70 cents a share, for the same period a year ago.

Analysts surveyed by Thomson Financial were expecting earnings of 79 cents a share.

Revenue in the quarter rose 11.7 percent to $22.31 billion, compared to $19.96 billion a year ago.

Same-store sales — a measure that compares sales at stores open at least a year — rose 4 percent in the quarter. Home Depot’s average sales ticket rose to $57.54 in the quarter, compared to $54.73 a year ago.

The company said it saw particularly strong growth in the quarter in its at-home services, appliances and flooring businesses. There also was strong sales in the quarter of products that help people prepare for hurricanes, such as generators and flashlights, said merchandising chief John Costello.

For the first six months of the year, Home Depot said it earned $3.02 billion, or $1.40 a share, compared to a profit of $2.64 billion, or $1.18 a share, for the same period a year ago. Six-month revenue rose 10 percent to $41.28 billion, compared to $37.51 billion a year ago.

Home Depot affirmed its 2005 sales growth guidance of 9 percent to 12 percent and increased its earnings per share growth guidance from between 10 percent and 14 percent to a range of 14 percent to 17 percent.

Home Depot has 1,940 stores in the United States, Canada and Mexico. It plans to expand to China.