Earnings Rise at Home Depot, Target and Staples in Quarter

Home Depot Inc. and Target Corp. on Tuesday reported robust earnings for the fiscal first quarter but offered conservative outlooks that disappointed investors.

Staples, the No. 2 U.S. office-supplies retailer, also reported strong profit growth, helped by the company reining in expenses.

Home Depot, the largest home improvement retailer, said profit jumped 35% to $856 million, or 36cents a share, beating analysts’ expectations of 33 cents.

But the company’s shares fell more than 7% on concerns that it did not raise its forecast for the current quarter or full year, as second-ranked rival Lowe’s Cos. did Monday, analysts said.

Home Depot, one of the 30 stocks in the Dow Jones industrial average, fell $3.60 to $44.90. On Monday, the shares rose slightly and some analysts raised their earnings estimates after Lowe’s reported a 54% jump in quarterly profit.

Analysts also noted that Home Depot’s 5% growth in sales at stores open at least a year missed some estimates and trailed Lowe’s 7.5% increase. Same-store sales are a key measure of retail performance.

Home Depot’s total sales in the quarter ended May 5 increased 17% to $14.3 billion.

The Atlanta-based retailer forecast a same-store sales increase of 2% to 4% for the second quarter, compared with Lowe’s outlook of a 4% to 6% gain.

Discount chain Target said its profit climbed 36% to $345 million, or 38 cents a share, on improved margins as well as higher sales of household staples and trendy but cheap clothes at its Target discount stores. The results beat the 36-cent-a-share average estimate of analysts polled by Thomson Financial/First Call. Profit also was helped by its tight rein on inventories--which lessens the need for deep markdowns--and expense controls, an analyst said.

But shares of Minneapolis-based Target fell $1.16, or 2.7%, to $41.54 on the New York Stock Exchange.

In a conference call with analysts, the retailer said it backed Wall Street forecasts for 2002 and its second quarter, which was a disappointment for investors who expected more earnings optimism from the company that also operates Marshall Field’s and Mervyn’s department stores.

“I think management is being cautious, and that is putting pressure on the stock,” Shelly Hale, retail analyst at Banc of America Securities, said. “They see margin contraction for the second half of the year and said sales have slowed recently.”

Target’s revenue, including credit fees, increased 15% to $9.6billion, while sales at stores open at least a year were up 5.2%. Total retail sales rose 14% to $9.34 billion, including a 19% rise in the Target division, while credit revenue climbed 41% to $280 million.

The Target discount stores gained shoppers from Kmart Corp., which filed for bankruptcy protection in January, by offering exclusive products such as Michael Graves housewares, investors said.

Revenue fell 0.9% at Mervyn’s and declined 0.7% at Marshall Field’s.

Staples said profit rose 65% to $65 million, or 14 cents a share, 3cents better than analysts’ expectations, even as sales rose just 2.6% to $2.74 billion. Same-store sales were flat.

The latest results exclude a one-time tax benefit charge of $29 million, or 6 cents a share.

Staples boosted sales of its private-label products, which have higher profit margins, and eliminated slow-selling products such as $399 personal computers.

The company said sales in consumables was strong but mitigated by weakness in technology and furniture sales on continued lackluster capital spending by businesses.

Framingham, Mass.-based Staples rose $1.30, or 6.3%, to $21.88 on Nasdaq.

Among other retailers reporting Tuesday, Saks Inc. said it had a first-quarter net loss after writing down the value of its Saks Fifth Avenue chain of department stores, in line with new goodwill accounting procedures, but its operating profit beat expectations.

The loss--including the write-off of $45.6 million, or 31 cents a share, and other one-time items--was $25.4 million, or 17 cents a share.

Saks earned $21.9 million, or 15cents a share, on an operating basis, up 24% from a year ago and 2cents better than analysts’ average estimate. Sales fell 2.6% to $1.43billion.

Also:* Borders Group Inc., the second-largest U.S. bookstore chain, reported a fiscal first-quarter profit of $3.9 million, or 5 cents a share, compared with a net loss of $18.9million, or 23 cents, in the year-earlier period. Sales increased 3% to $751.7 million.

* AutoZone Inc., the largest U.S. auto-parts retailer, said fiscal third-quarter profit rose 61% to $102.3million, or 96 cents a share, as sales rose 7.4% to $1.22 billion.