HD is out of touch
They have saturated the market going into what will be very tough times ahead. Only by closing some of the newly opened stores will they boost operating efficiencies.
That will mean write-offs
They are having a tough time hiring in this area for now, but that won't last.
Rate cuts will be a long way from helping the current state of the economy.
After 10 years of growth- overextended credit, lay-offs, and high energy bills will not just fix themselves in a few months
And HD consumers/contractors will not be flocking back so soon
Short HD at 44.09 with a 6-9 month price target of 20
New 52 week lows end of March? when reality sets in.
Tuesday February 20, 1:19 pm Eastern Time
Home Depot's Profit Falls
ATLANTA (Reuters) - Home Depot Inc. (NYSE:HD - news), the world's largest home-improvement retailer, on Tuesday reported fiscal fourth-quarter earnings fell 20 percent, but said it is confident it can meet profit targets despite an uncertain economy.
Home Depot said earnings for the quarter ended Jan. 28 came to $465 million, or 20 cents a diluted share, compared with $578 million, or 25 cents a diluted share, a year earlier.
The results met the First Call/Thomson Financial analyst consensus estimate of 20 cents, which had been lowered from 24 cents in January when Home Depot announced a profit warning.
Analysts seemed pleased that Home Depot indicated it could boost operating efficiencies in the tough near-term economic environment.
``I thought the key message came through loud and clear; a heightened focus on improving return on assets,'' said Dan Wewer of Deutsche Bank Alex. Brown, after a morning conference call.
``The Street was concerned that they may have talked down expectations,'' said Wewer. ``They see a very weak economic environment, yet are still confident with the earnings ability. That shows they're not waiting for the world to get better.''
In New York Stock Exchange trading around midday, Home Depot shares, which have traded as high as $70 in the past year, gained $1.49, or 3.5 percent, to $44.49.
Revenue rose 14 percent to $10.46 billion from $9.17 billion in the fourth quarter. But comparable-store sales, or those at stores open about a year, were hurt about 2 percent due to continued weakness in lumber prices, which Home Depot said declined to an eight-year low during the quarter.
The company also said sales were affected by lower retail prices for building materials, and stronger year-earlier sales related to the Year 2000 computer problem.
Many retailers such as Home Depot and rival Lowe's Cos. (NYSE:LOW - news) have suffered as a softening U.S. economy hampered sales. But many analysts are expecting the retail outlook to improve in the second half of this year, as the effects of recent U.S. Federal Reserve rate cuts help stimulate spending.
During a morning conference call, Chief Executive Robert Nardelli said Home Depot expects to ``continue to see pressure for competition for share of our customers' wallet'' over the next six months, as many consumers face higher energy and other costs.
``We have not yet seen the impact of interest-rate cuts in our sales,'' Nardelli said. Home Depot expects comparable-store sales to be ``flat to slightly negative'' in the first quarter.
But Nardelli said Home Depot expects to meet the current First Call/Thomson Financial analysts' consensus estimate of 26 cents for the first quarter.
Wayne Hood of Prudential Securities noted Home Depot's average inventory per store was down 2 percent, a good sign. ''Unless they have flat or declining comparable-store sales in 2001, that should show improvement,'' Hood added.
Analysts also weren't bothered by Home Depot's announcement that it would slow the pace of store openings to 200 in fiscal 2001 from 204 a year earlier.
Home Depot said it would open 118 stores in its 2001 first half, up 46 percent over the year-earlier period. Opening more stores earlier in 2001, Nardelli said, would enhance overall sales for the year.
``At this point, it's not about the number of stores, but it's about the quality of the stores that we are opening,'' Nardelli said. Home Depot ended fiscal 2000 with 1,134 stores in the United States, Canada and South America.
Home Depot detailed a number of strategies it was taking to boost productivity, including quickening the rollout of both its Pro initiative, which provides individualized attention to professional contractors; and the Store Productivity Initiative, which reduces stocking during key business hours.
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