Housing improvement helps Home Depot’s sales
The housing market is aiding, not hampering, Home Depot’s sales results, its chief executive said Tuesday, as residential real estate continues to show signs of recovery.
In hard-hit metro Atlanta, same-store sales for the third quarter are 4 percentage points higher than Home Depot’s 4.3 percent average increase, compared to the same quarter in 2011. In difficult markets in Florida and California, Home Depot’s sales have improved not just from year to year, but from one quarter to the next.
“We’re not lighting rockets over this, and we don’t want to get out over our skis, but we’re starting to see recovery in the housing market,” Home Depot chairman and CEO Frank Blake said in a conference call Tuesday. “It’s been consecutive. It’s been consistent.”
The acknowledgment was noteworthy, analyst and Robert W. Baird managing director Peter Benedict said in a research note, because Home Depot is “historically conservative” when it comes to signs of healing in the housing market.
Blake said that was in part because unusual weather patterns through 2011 made it difficult to determine exactly where the housing recovery stood, and when people were spending money on weather-related repairs. But he said as the Atlanta home improvement retailer’s business continues to improve, continued consecutive quarters of higher sales give him confidence that the market is healing.
The sequential improvement, paired with rising housing starts and other indicators, is a strong sign that the economy is on a path to recovery, Home Depot chief financial officer Carol Tomé said.
Still, Tomé said as a whole, the company’s professional contractor customers are not increasing their business at the same rate that non-professional shoppers are. Although the largest professionals are increasing their purchases at a rate that is higher than Home Depot’s overall sales increase, the business has not yet trickled down to their smaller contractor counterparts.
“We are not recovered yet,” Tomé said.
Home Depot made $947 million in the third quarter, a 1.4 percent increase over what it made in the same quarter a year ago. The company raised its sales expectations to a year-over-year increase of 5.2 percent, the third time it has raised those expectations since February.
The company did not account for any increase in sales in the fourth quarter due to Superstorm Sandy, but said the preparation for the storm accounted for a $70 million lift in sales for the third quarter, which ended Oct. 28, just as Sandy was about to make landfall. Home Depot expects to see at least $360 million in spending in the Northeast related to the Sandy recovery, but because some areas are still affected, executives could not say whether that spending is expected to take place in the fourth quarter, or later.
“We don’t know what the weather’s going to be like in New Jersey and New York as we head into the recovery efforts,” Blake said. “The timing is very uncertain.”
About the Author
Arielle Kass covers Gwinnett County for The Atlanta Journal-Constitution. She started at the paper in 2010, and has covered business and local government beats around metro Atlanta. Arielle is a graduate of Emory University.
