Home Depot Fiscal 2nd-Quarter Profit Rises 23%, Meeting Forecasts
Home Depot Inc. said fiscal second-quarter profit rose 23%, matching forecasts but disappointing investors who had anticipated better results.
Several other retailers reported earnings that mostly matched Wall Street expectations, but cautionary statements about the third quarter from some, as well as ongoing wariness about a cooling U.S. economy, pressured share prices, analysts said.
Home Depot said profit grew to $838 million, or 36 cents a share, in the latest quarter as sales jumped 21% to $12.6 billion. Sales at stores open at least a year rose 6%, in line with estimates.
Shares of Home Depot fell $5.50, or 9.3%, to close at $53.50, pulling down other retailers and helping the Dow Jones industrial average post its first decline in four days.
Analysts said some retail stockholders may simply be nervous about the effect on consumer spending if the economy continues to slow. Home sales have weakened recently, and that could hurt sales at Home Depot and other stores, analysts note.
But investors also were disappointed that Home Depot’s profit only met the average estimate of analysts surveyed by First Call/Thomson Financial, said analyst Alan Rifkin of Lehman Bros. Inc. Other estimates were higher, including 39 cents a share on EarningsWhispers.com.
“When you have a lofty multiple like Home Depot--45 times earnings--investors want you to beat expectations, not just meet them,” said Rifkin, who rates the stock “outperform.”
The Atlanta-based company said it expects third-quarter earnings to meet First Call’s 31-cent average estimate.
At a Glance
Other retail earnings, excluding one-time gains or charges unless noted, include:
* HomeBase Inc. said earnings plunged 73% in its fiscal second quarter to $2.8 million, or 7 cents a share. Sales fell 10% to $407 million, reflecting a 10.9% decline in same-store sales. The home improvement retailer’s results exclude costs associated with the development and launch of five House2Home test stores.
* Target Corp. said fiscal second-quarter profit rose 13% to $257 million, or 28 cents a share, from $228 million, matching forecasts, as strong sales at its namesake discount chain offset weakness at its other stores. Target also warned that third-quarter earnings will miss analyst expectations of 30 cents a share, in part because of higher costs to open stores. For the latest quarter, sales grew 7.3% to $8.25 billion, with same-store sales up 2%. Target shares fell $2.94 to close at $27 on the NYSE.
* Intimate Brands Inc. said profit rose 12% in its fiscal second quarter to $99.8 million, or 20 cents a share, meeting expectations, as sales gained 13% to $1.15 billion. Same-store sales rose 9%, including a 12% rise at the Victoria’s Secret chain and a 3% rise at Bath & Body Works.
* J.C. Penney Co. reported a 90% plunge in profit to $11 million, or 1 cent a share, because of weak sales and price markdowns, and said its second-half earnings may be hurt if slow sales persist. Analysts were expecting break-even results. Revenue edged up just 1.6% to $7.43 billion. Penney also shelved plans to issue a tracking stock for its Eckerd drugstore chain this year. Profit at the Eckerd division plummeted 97% even as same-store sales rose 9.7%. Profit margin fell because a higher percentage of sales came from less-profitable managed-care pharmacy items, the company said. Shares in Penney fell $1.44 to close at $16.50 on the NYSE.
* Saks Inc. said it had a loss in the fiscal second quarter of $4.8 million, or 3 cents a share, because of lower sales and discounts at its regional department stores and Internet-related spending. The company earned $26.6 million, or 18 cents, a year ago. Sales were up less than 1% to $1.39 billion.
* Staples Inc. said profit fell 19% to $42.6 million, or 10 cents a share, in its fiscal second quarter, citing losses at its Staples.com Internet site. Sales rose 20% to $2.2 billion. The results beat forecasts by a penny.
* TJX Cos., operator of T.J. Maxx and Marshalls chains, said profit edged down 0.5% to $114 million, or 39 cents a share, a penny better than estimates, as unseasonably cool weather slowed clothing sales. Sales rose 7% to $2.2 billion.
* Williams-Sonoma Inc. said fiscal second-quarter profit grew 12% to $5.06 million, or 9 cents a share, a penny better than estimates, as sales rose 30% to $344 million at its Pottery Barn home furnishings chain and namesake kitchen goods stores.
