Home Depot Scaling Back on Earnings Expectations

Stifled by weak prices and a slowing economy, Home Depot Inc. warned Friday that its fourth-quarter earnings will fall short of expectations on flat sales.

The world’s largest home-improvement retailer said it expects to earn 20 cents a share for the quarter ending Jan. 28, 4 cents lower than the consensus of analysts surveyed by First Call/Thomson Financial. Home Depot earned 25 cents in the same period a year ago.

The company said the revision was caused by “a declining economy” and continued price weakness in lumber, building materials and related products.

For the year, Home Depot expects to earn $1.10 a share, short of analysts’ forecast of $1.14.

Shares of Home Depot, which is one of the 30 companies in the Dow Jones industrial average, fell $3.25 to $41 in trading on the New York Stock Exchange.

“We’re clearly facing a harsh and rapidly downward-spiraling economic environment,” Bob Nardelli, Home Depot’s new chief executive, said.

Sales have been crimped by cold weather, rising energy costs, growing consumer debt, investment losses and higher interest rates, he said.

The company also expects those factors to curtail its performance into the first half of this year, he said.

Nardelli said the company’s four-day, 10% discount on all items last month helped it move $100 million worth of merchandise. He declined to offer specifics about how much the discount affected profits.