ATLANTA (AP) — Home Depot's second-quarter net income jumped 17 percent, helped by an improving housing market and good response to holiday events.
The nation's biggest home improvement retailer's results beat Wall Street expectations and the company raised its full-year earnings and revenue expectations.
A slowly improving employment landscape and extremely low interest rates this year have created such great demand that homebuilders are having some difficulty securing land and keeping pace. That's good news for home-improvement retailers because as home values improve customers feel more comfortable investing money in projects for their home. Home Depot's smaller rival Lowe's Cos. will report results Wednesday.
"There were four key factors that drove our performance: strong summer events, a recovering seasonal business, commodity inflation and strength across the remainder of the store," said Craig Menear, executive vice president of merchandising.
Signs that the housing market is on the upswing are plentiful: on Friday, the Commerce Department said that builders began work on houses and apartments at a seasonally adjusted annual rate of 896,000 in July. That was up 6 percent from June, though below a recent peak of more than 1 million in March.
On Thursday the National Association of Home Builders/Wells Fargo builder sentiment index reported that confidence among U.S. homebuilders is at its highest level in nearly eight years, fueled by optimism that demand for new homes will drive sales growth into next year.
On the flip side, there are some signs rising mortgage rates may be slowing housing's breakneck speed, and CFO Carol Tome said that the company, like many others, is watching the interest rate environment since consumer spending and mortgage availability could be hurt if interest rates rise.
For the three months ended Aug. 4, Home Depot Inc. earned $1.8 billion, or $1.24 per share. That compares with $1.53 billion, or $1.01 per share, a year ago.
Revenue for the Atlanta company climbed more than 9 percent to $22.52 billion, from $20.57 billion. The strongest categories including kitchens, indoor and outdoor garden, lumber, lighting, tools and other categories. Following a spring that was cool and wet across many regions of the country, outdoor project sales recovered "and then some," Menear said.
Memorial Day, Father's Day and Fourth of July sales events were well received, he said.
Analysts polled by FactSet expected earnings of $1.21 per share on revenue of $21.79 billion.
Revenue at stores open at least a year, a key indicator of a retailer's health, increased 10.7 percent. In the U.S., the figure rose 11.4 percent.
Same-store sales data removes the volatility of locations opened or closed in the past year.
Home Depot now foresees fiscal 2013 earnings of $3.60 per share, with revenue up about 4.5 percent. The chain previously predicted earnings of $3.52 per share, with revenue rising approximately 2.8 percent. Based on 2012's revenue of $74.75 billion, the new guidance implies $78.1 billion.
Wall Street expects full-year earnings of $3.64 per share on revenue of $77.57 billion.
Home Depot had 2,258 stores in 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico at quarter's end.
Shares slipped 92 cents to close at $74.29. The stock has risen steadily from a low of $56.12 a year ago to hit a 52-week high of $81.56 last month.