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Home Depot beats 2Q
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August 14, 2001: 8:02 p.m. ET
No. 1 home improvement retailer posts double-digit sales gain
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NEW YORK (CNNfn) - Home Depot Inc. reported higher second-quarter earnings Tuesday that beat Wall Street expectations and reiterated third-quarter guidance as the nation's biggest home improvement retailer benefited from tax rebate checks and the robust housing market.
For the quarter ended in July, Dow component Home Depot (HD: up $1.20 to $49.30, Research, Estimates) posted a profit of $924 million, or 39 cents a share, up from $838 million, or 36 cents a share, a year earlier. Analysts polled by earnings tracker First Call anticipated 37 cents a share.
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VIDEO
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 Home Depot, the world's largest home-improvement retailer, said its fiscal second-quarter earnings rose 10 percent, beating Wall Street estimates. Its CEO Robert Nardelli appeared on "Lou Dobbs Moneyline" to tell us more. |
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The company also said it anticipates meeting Wall Street's third-quarter estimates of 33 cents a share.
Second-quarter revenue for the Atlanta-based chain increased 16 percent to $14.6 billion from $12.6 billion.
The company said sales of appliances and paint helped drive improved revenue growth at stores open at least a year.
Shares of Home Depot jumped $1.55 to $49.65 in early trading Tuesday following the report.
Brian Postol, an analyst with A.G. Edwards & Sons, said Home Depot's second quarter numbers were solid, but noted that much of the gains came from expense control amid the sluggish economy.
"There's a long way to go for these guys, but I think their programs are the right ones," Brian Postol, a retail analyst at A.G. Edwards & Sons said.
Carol Tome, the company's chief financial officer, told analysts during a conference call following the earnings report that the company is focused on controlling expenses, which increased in the quarter due to higher wages, store occupancy costs and medical costs.
Tome said those costs were offset by improved labor productivity.
"We remain focused on expense control and, as a result, expect improvement in the third quarter," Tome said.
CEO Bob Nardelli said the stubborn economy in which consumers have streamlined spending has had an impact on sales, but relative strength in new and existing home sales has helped to offset that effect.
The company also said it is seeing sales gains from tax rebate checks as it continues its program of encouraging consumers to spend the checks on energy-saving items.
Nardelli said the effects of six interest rate reductions by the Federal Reserve this year have been a positive for the company, as it makes it cheaper for consumers to borrow money. However, though the Fed is widely expected to cut rates a seventh time Aug. 21, Nardelli expressed concern that the impact of Fed rate cuts is waning.
Separately, Nardelli said the company no longer will grant cash refunds or exchanges without receipts at its stores effective Sept. 3, and that it also plans to introduce a debit card.
Home Depot opened 115 new stores in the first half of 2001, 71 of which it opened in the second quarter.
Home Depot, along with Lowe's (LOW: up $0.73 to $37.18, Research, Estimates), is recovering from a recent drop in prices for lumber and building materials thanks to a robust housing market and continued home improvement spending by consumers hurt in the slowing economy.
Tome said the effect of lumber prices was insignificant in the second quarter although they have dipped slightly from a year earlier.
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Home Depot also recently entered the home appliance market, getting a nod from analysts, now that one of the biggest appliance dealers, Circuit City Group Inc. (CC: up $0.82 to $18.32, Research, Estimates), has exited the business to focus squarely on consumer electronics and software. 
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Home Depot
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