Home Depot Says Store Upgrades Bolstering Profits
Feb 24, 2004
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Home Depot Inc., based in Atlanta, GA, U.S. has announced that its quarterly earnings rose 39 percent, topping estimates, as self-checkout counters, new merchandise and other store upgrades helped reverse a year-earlier decline in sales.
The world's largest home improvement retailer, which faces stiff competition in big U.S. cities from rival Lowe's Cos. Inc., said fourth-quarter earnings rose to U.S. $951 million, or $0.42, from $686 million, or $0.30 a share, a year earlier.
Sales at stores open at least a year, an important performance measure for retailers, rose 7.6 percent, improving from a 6-percent decline in the 2002 quarter.
Analysts, on average, were expecting a profit of $0.39 cents a share, according to Reuters Research.
Home Depot was "supported by a very good spending environment for home improvement in the fourth quarter and translated that to very solid and impressive earnings growth," said Colin McGranahan, an analyst with Sanford Bernstein.
Mr. McGranahan also said the retailer delivered "very nice gross margin expansion," likely as a result of lowering its cost of goods and a reduction in inventory "shrink," or lost or stolen merchandise. Home Depot has also added higher-end products in decor and other categories that have better profit margins.
Home Depot, which is investing heavily in marketing, store renovations and technology such as touch-screen registers and self-checkout stations, said the number of customer transactions rose 7 percent in the quarter.
Total sales in the fourth quarter were up about 15 percent to $15.1 billion, rebounding from a 2-percent drop for the prior year. Home Depot said its business that installs sheds, roofing and other products, a key area it is targeting for expansion, grew 3.5 times the company average in fiscal 2003.
The retailer added 64 new stores in the fourth quarter, bringing its total at year-end to 1,707. In 2004, Home Depot plans to open 175 stores.
In a statement, the chain backed previous forecasts for sales to rise 9 percent to 12 percent this year as per-share profit increases 7 percent to 11 percent, including an accounting change. (Reuters)
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