Home Depot sees skittish consumer
'Economy's fought us every step of the way': Nardelli
By Jennifer Waters, CBS.MarketWatch.com
Last Update: 7:28 PM ET May 15, 2001
ATLANTA (CBS.MW) -- Home Depot Inc. managed to eke out an earnings surprise Tuesday, no thanks to the economy and its impact on skittish consumers.
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Investors rewarded the chain for the effort, pushing shares up 95 cents to close at $50.10 in what was generally a lackluster day for retail stocks.
The nation's largest home-improvement chain beat Wall Street projections with a profit of 27 cents a share, or $632 million. Analysts reporting to First Call/Thomson Financial had reached a consensus estimate of 25 cents a share.
However, on a per-share basis, the results were virtually flat to last year when Home Depot (HD: news, msgs, alerts) reported earnings of 27 cents a share, or $629 million.
Same store sales, receipts rung up at stores open more than a year, slipped 3 percent from the year-ago period, "negatively impacted," the company said, by lower prices in lumber and building materials.
Home Depot said that sales at its warehouse-styled stores for the first quarter rose 10 percent to $12.2 billion vs. $11.1 billion generated in the same period a year ago.
On a conference call with investors and analysts Tuesday morning, Chief Executive Robert Nardelli worried that the uncertain economy would leave sales flat to negative in the second quarter.
"The economy has certainly fought us every step of the way," he said. "This is the toughest sales environment in the history of the company."
As a result, he's sticking to the First Call earnings consensus of 37 cents a share for the second quarter. "We continue to see consumer confidence fading," he said.
Customer traffic braked during the first quarter, curbing the average ticket by 1.8 percent to $48.64. Sales per square foot were down 10 percent to $386.41, but could have been lower. Nardelli said sales were strong Home Depot's first year of selling big appliances.
Despite sluggish sales and an unclear economic climate, Nardelli stressed that Home Depot would continue with its plans to add stores and strengthen long-term sales despite an uncertain economic environment.
"We're maintaining our focus on the long-term for continued growth and market share," he said. Home Depot's strong balance sheet allows it to stay on track during tough times, he said.
"This is the time to use it when many of the other competitors can't," Nardelli said, adding that Home Depot is on track to open 200 stores and will hire 40,000 sales associates this year.
Jennifer Waters is a reporter for CBS.MarketWatch.com.
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