Home Depot Joins Growing Choir of Cautious Outlook Despite Rising Profit in Q4

Andrew Klips |

Home Depot (HD), the world’s biggest home improvement retailer, reported better-than-expected sales and earnings Tuesday morning on the back of an extra week of sales and a revival of sales in the States, partly related to destruction in the wake of Superstorm Sandy that pummeled the eastern seaboard of the U.S. late in October.

Meanwhile, the company boosted its dividend, announced a new share repurchase plan, but joined an ever-growing list of companies, including rival Lowe’s Companies, Inc. (LOW), in providing a cautious guidance going forward.

For the quarter, Home Depot reported sales of $18.2 billion, a 13.9 percent increase from the year prior quarter’s $16.0 billion. Fiscal 2012 consisted of 14 weeks (versus 13 weeks in fiscal Q4 2011), accounting for a $1.2 billion increase in sales. Less the extra week, sales grew by 6.3 percent year-over-year. Gross profit increased 13.7 percent to $6.4 billion. Net earnings for the quarter mushroomed to $1.0 billion, or 68 cents per share, from $774 million, or 50 cents per share, in the same quarter of 2011. Excluding a benefit of 1 cent per share related to the closing of a China store, earnings were 67 cents per share.

Wall Street was expecting the company to report EPS of 64 cents on revenue of $17.7 billion.

"We ended the year with a strong performance as our business benefited from a continued recovery in the housing market coupled with sales related to repairs in the areas impacted by Hurricane Sandy," said Frank Blake, chairman and chief executive at Home Depot.

For the full fiscal year 2012 (ended February 3, 2013), sales were $74.8 billion, up 6.2 percent from $70.4 billion in fiscal 2011. Adjusted earnings per share for the 2012 year, which excluded effects of store closings in China, were $3.10, versus $2.47 in fiscal 2011.

For the year, same-store-sales increased 4.6 worldwide and 4.9 percent in the United States. During the fourth quarter, sales at comparable stores increased by 7.1 percent in the States. From a quarterly perspective and on a percentage basis, same-store-sales growth at Home Depot has outstripped Lowe’s for nearly four consecutive years now.

Across those 15 quarters, shares of HD have appreciated by about 210 percent, while LOW shares have increased about 106 percent.

Home Depot raised its quarterly dividend by 34 percent to 39 cents per share and approved a $17 billion stock buy-back program that replaces its previous plan.

Looking ahead, Home Depot said that it expects to earnings per share growth of approximately 12 percent to $3.37 for all of fiscal 2013 after anticipated share repurchases. The company foresees sales increases of about 2 percent for the year, implying revenue of $76.2 billion.

The revenue estimate was roughly in line with analyst predictions, but the EPS was light of the $3.50 expected.

Shares of Home Depot closed trading on Monday down by 2.5 percent at $63.92 and are ahead by 40 percent in the past 52 weeks.

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Companies

Symbol Name Price Change % Volume
HD Home Depot Inc. (The) 126.82 1.37 1.09 4,433,646
LOW Lowe\'s Companies Inc. 71.50 0.69 0.97 4,821,944

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