Home Depot announced it had a very profitable second quarter Tuesday, besting Lowe’s in same-store sales, a key retail metric.
But what Wall Street analysts really wanted to know was how the Atlanta-based home improvement retailer also beat the nation’s metric for economic growth: gross domestic product.
Home Depot said that while its growth generally is tied to GDP, sales also are cyclical and can be weather-dependent. First quarter sales were chilled by frigid weather, while second quarter sales were fanned by hot temperatures, creating a run on fans and air conditioning units.
Carol Tome, Home Depot’s chief financial officer, told analysts, "We expect that certain quarters will exhibit such a disconnect as there are factors such as weather-related sales, storm damage-related sales and event-driven sales that on a short-term basis can't be matched to any specific economic statistic."
Tome told The Atlanta Journal-Constitution that second quarter sales also were boosted by roof repairs and garden beautification projects after a run of bad weather that effected big box retailers. Home Depot’s store in Joplin, Mo., was destroyed by a storm, while a tornado took out a Lowe’s store in Sanford, N.C.
Home Depot posted $1.4 billion in profit for the quarter, or 86 cents per share, on revenue of $20.2 billion. Profits per share rose 19.4 percent compared to second quarter last year, while revenue rose 4.2 percent. Home Depot expects continued sales growth this year, or a 2.5 percent increase over 2010.
Same-store sales, a measure retailers use to compare stores open for at least a year, were up 4.3 percent in the quarter, or 3.5 percent at U.S. stores. It was the ninth consecutive quarter that Home Depot beat Mooresville, N.C.-based Lowe’s in that metric. Lowe’s same-store sales decreased .3 percent last quarter.
On Monday, Lowe’s CEO said the company’s performance fell short of expectations. Lowe's posted an $830 million profit on $14.5 billion in sales. Per-share profit increased 10.3 percent to 64 cents. Sunday, however, Lowe’s closed seven stores, including one in Riverdale. That Georgia store closure left nearly 100 people unemployed without warning.
Janet Shim, a retail analyst in Santa Monica, Calif., with market research firm IBISWorld, said Lowe’s probably should have stopped building new stores during the recession. Lowe's has 1,753 stores in the U.S., Canada and Mexico.
Home Depot, she added, still has more stores (2,245 retail outlets in the U.S., Caribbean, Canada, Mexico, China and Guam), but halted U.S. growth during the downturn, closing stores, shuttering some divisions and focusing on low prices.
"Home Depot really adapted to the new purchase patterns of consumers who are pinching pennies,” Shim said.
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