Home Depot profit tops estimates as seasonal sales rebound

Home Depot Inc., the largest U.S. home-improvement retailer, posted second-quarter profit that topped analysts' estimates and raised its forecast for the year as sales of seasonal merchandise rebounded. The shares gained.

Net income in the three months through Aug. 3 rose 14 percent to $2.05 billion, or $1.52 a share, from $1.8 billion, or $1.24, a year earlier, the Atlanta-based company said today in a statement. The average of 25 analysts' estimates compiled by Bloomberg was $1.44.

Chief Executive Officer Frank Blake has focused Home Depot on boosting sales from existing locations and investing in e-commerce, rather than opening new stores. Second-quarter revenue gained 5.7 percent to $23.8 billion, topping analysts' average estimate of $23.6 billion, helped by improved weather and rising home prices that are spurring consumers to spend on renovations.

Profit this year will be $4.52 a share, including the benefit of share repurchases, Home Depot said. The company had forecast $4.42.

Home Depot rose 3.3 percent to $86.35 at 6:36 a.m. in New York. The shares gained 11 percent in the 12 months through yesterday. That compares with a 15 percent advance for Lowe's Cos. and a 19 percent increase for the Standard & Poor's 500 Index.

Spring Merchandise

A harsh winter and late spring this year delayed purchases of seasonal items such as landscaping materials, hurting Home Depot's results in the first quarter. Sales in those categories rebounded in the second quarter, Blake said in today's statement.

Same-store sales, considered an important measure of performance because only established stores are counted, rose 5.8 percent. Analysts expected a gain of 4.4 percent, according to Consensus Metrix.

Rising housing prices have prompted consumers to spend more on their homes, helping both Home Depot and Lowe's Cos., which reports second-quarter results tomorrow.

While values have been consistently gaining for more than two years, the growth slowed to a 4.4 percent advance last quarter from an increase of 8.3 percent in the first quarter, according to the National Association of Realtors. Price appreciation is moderating as more properties are listed for sale and buyer demand slows, the group said.

Limited availability of credit, sluggish wage gains and higher interest rates are also proving to be obstacles to the continued housing recovery. Pending sales of previously owned homes fell 1.1 percent in June, the realtors group said last month.

Home Depot said it had about 409.7 million customer transactions in the quarter and that the average purchase increased 1.8 percent to $58.43.

Home Depot has bought back $3.5 billion in shares this year and said it will repurchase another $3.5 billion over the remainder of the year.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9bloomberg.net To contact the editors responsible for this story: Nick Turner at nturner7bloomberg.net Kevin Orland, Kim McLaughlin