Home Depot profit skids
The No. 1 home improvement retailer says earnings plunged 28% as a weak housing market took a toll on sales.
NEW YORK (CNNMoney.com) -- Home improvement retailer Home Depot Inc. posted a significant drop in quarterly profit Tuesday as the weak housing market depressed sales at its retail stores.
The retailer, which last month named Frank Blake chairman and chief executive after Robert Nardelli resigned, said fourth-quarter profit plunged 28 percent.
Blake said in a statement that 2006 retail results were "disappointing," and added that the company would look to improve its market share this year. "2006 was a challenging year for us," he said on a conference call with analysts.
Earnings in the fourth quarter ended Jan. 28 sank to $925 million, or 46 cents a share, from $1.3 billion, or 60 cents a share, a year earlier.
Excluding expenses of 4 cents a share tied to executive severance, profit came to 50 cents a share in the latest period, Home Depot said.
Analysts on average expected earnings of 50 cents a share, according to First Call.
"Everybody understands that the backdrop is awful, exiting homes sales fell and housing starts were down," said Donald Trott, an analyst at Jefferies & Co.
In addition, "this is a very cyclically sensitive business," Trott added.
Total sales rose 4 percent to $20.3 billion, below analysts' estimates of $20.8 billion.
Retail store sales fell 2 percent to $17.4 billion, while sales at stores open at least a year fell 6.6 percent. The number of customer transactions and the average purchase both fell, thanks in part to softness in big ticket items, the company said.
Chief Financial Officer Carol Tome said sales of consumer electronics were also disappointing. "Don't expect us to go so deep next year," she said.
Sales at Home Depot Supply, which distributes building materials and other products to professionals, rose 64 percent to $2.9 billion, helped by acquisitions.
Home Depot, facing more competition as rival Lowe's Cos. Inc. (Charts) as moves into big U.S. cities, said last week that it was considering a sale, spin-off or initial public offering of the supply business in order to focus on its retail stores, where sales have slumped in the past year as U.S. home sales weakened.
The company said it would give its financial outlook for the year at its Feb. 28 analyst meeting.
-- from staff and wire reports
The analyst quoted in this story does own shares of Home Depot. Jefferies & Co. does not have investment banking ties to the company.