Home Depot revenue picks up in 4th quarter

AP News
Posted: Feb 22, 2011 6:27 PM
Home Depot revenue picks up in 4th quarter

Customers spending more on higher-priced items like refrigerators and windows helped Home Depot's fourth-quarter net income rise 72 percent, the company said Tuesday.

The largest U.S. home-improvement retailer raised its earnings guidance and dividend but kept its outlook relatively modest as it reported its financial results.

The results include Home Depot's first yearly revenue increase since 2006, before the recession and housing crash hammered the home-improvement business.

"The overall picture is one of a stabilizing business," CEO Frank Blake said in a call with analysts. "This is a source of some confidence for 2011 because it is occurring despite the continued weakness of the housing markets."

The number of transactions worth $900 or more each _ a group that makes up about 20 percent of Home Depot's sales _ rose 10 percent during the quarter, the first time that category had risen in a year, said CFO Carol Tome.

Customers were responding to appliance promotions and trying to take advantage of the energy tax credit that expired at the end of the year, she said. Outside that, however, "the consumer remains cautious on big-ticket spending," Tome said.

Core repair and smaller remodeling projects remain the focus of most Home Depot customers, she added.

Fourth-quarter net income rose to $587 million, or 36 cents per share, from $342 million, or 20 cents per share, last year. Analysts expected 31 cents per share, according to FactSet.

Revenue rose 4 percent to $15.13 billion. Analysts expected $14.81 billion.

Revenue in stores open at least a year rose 3.9 percent globally and 4.8 percent in the U.S. The measure is considered an important gauge of a retailer's financial health because it excludes stores that open or close during the year.

Results improved in nearly every state, including Florida and California, two states that were hit hard in the housing downturn.

"While they are not leading us out of the downturn, they are at least no longer an anchor," Blake said.

Strong categories included kitchens, outdoor and indoor garden products, electrical products and tools.

The average amount that customers spent rose nearly 3 percent to $51.31.

The total value of transactions under $50, about 20 percent of the company's business, rose 1.8 percent year over year.

Higher raw material costs are leading to selective price increases, company executives said. Over the past 45 days specifically, vendors have been requesting price increases; the company said it reviews each request separately.

The company is stocking up on lawn care products, gardening equipment, patio furniture and grills to prepare for its busiest season, spring.

For the year, net income rose 25 percent to $3.34 billion, or $2.01 per share, from $2.66 billion, or $1.57 per share. Revenue rose 2.8 percent to $68 billion.

For 2011, the company expects net income to rise 9.5 percent to $2.20 per share. That's up from a prior forecast of a 7 percent to 9 percent increase. Analysts expect $2.25 per share.

Home Depot expects revenue to rise 2.5 percent, from a prior forecast of 2 percent to 2.5 percent. That implies revenue of $69.7 billion. Analysts predict revenue of $69.28 billion.

The Atlanta company also raised its quarterly dividend 6 percent to 25 cents, payable March 24 to shareholders of record as of March 10.

Home Depot plans to buy back about $2.5 billion in shares throughout 2011.

Home-improvement retailers are seeing signs of life from shoppers as the housing industry slowly improves and the consumers slowly start to spend normally again after a slowdown during the recession.

Home Depot Inc.'s chief rival, Lowe's Cos., is scheduled to report its results Wednesday.

Shares edged down 39 cents to $38.09.