Storm sales help Home Depot's third quarter
Storm-related sales benefited Home Depot, but the home improvement retailer said it is doing well across the country, even as the housing market continues to struggle.
"In the U.S., we still do not see, and do not expect to see in the near term, any meaningful tailwind from the housing market," Home Depot Chairman and CEO Frank Blake said in a third-quarter conference call. "Inventories remain high, pricing is under pressure and credit is still difficult."
Still, the Atlanta company's same-store sales rose, and both the number of transactions and the amount that shoppers spent at the store increased in the quarter.
Home Depot Chief Financial Officer Carol Tome said the professional contractor -- which makes up 30 percent of Home Depot's business, but just 3 percent of shoppers -- has been spending more, and the company is encouraged by that. The increased spending shows that pro customers are sticking with the retailer, she said.
Pro customers also are being approved for Home Depot credit cards more frequently.
Higher shopper spending is helped by bigger-ticket items such as roofing, said Wayne Hood, managing director for equity research for BMO Capital Markets. He said the increase in pro sales is a sign that some of the company's pilot programs to bring in those shoppers are working.
"I think that's terrific," he said of the increase.
Flat sales results in Canada were also a strong sign, Hood said, as Home Depot's competitors there saw decreased sales.
Hurricane Irene led to increased sales on the East Coast, but the company also was hit with $26 million in expenses from storm damage. One store, in New York, is still closed and is expected to reopen on Black Friday.
But Home Depot's strongest division was in the West, where Hurricane Irene was not a factor.
Tome said continued job loss in Georgia has put pressure on this market. She described the company's results here as "good, not great."
"The economic environment is still weak, particularly in the housing area," she said of the nation. "The housing market is still very soft."
Home Depot increased its dividend 16 percent, the second time this year it has raised the dividend. The company is continuing its plan to repurchase stock, and raised its outlook for the year.
The company also is shifting its capital structure to allow for more financial flexibility, Tome said, reducing its called-for debt ratio in relation to its earnings before taxes and other expenses.
Home Depot made $934 million in the third quarter, a 12 percent increase over the $834 million it made in the same quarter last year.
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.
