Home Depot Earnings Up 21%

Home Depot Inc., the world’s largest home-improvement retailer, Tuesday reported a 21% rise in quarterly profit as it cut costs, but a weak outlook sent its shares down 13%.

The company, which is revamping its business as chief rival Lowe’s Cos. moves into its most lucrative markets, said it expects earnings for the current quarter to miss Wall Street consensus estimates by 1 cent a share.

Home Depot also said sales for the full year will fall short of longer-term growth goals.

For the third quarter, Home Depot had net income of $940 million, or 40 cents a share, compared with $778 million, or 33 cents, a year earlier. Sales rose 9% to $14.5 billion, aided by new stores and strength in appliances, paint and flooring.

Although profit for the quarter ended Nov. 3 was in line with analysts’ average estimate compiled by Thomson First Call, sales at stores open at least a year, a key measure of retail performance, fell 2%. In August, Home Depot had forecast a rise of 2% to 4% in comparable-store sales.

Home Depot will not meet its longer-term sales growth goal of 15% to 18% this year, Chairman Robert Nardelli said.

Home Depot’s results contrasted sharply with Lowe’s, which Monday topped Wall Street estimates with a 35% increase in third-quarter profit and said fourth-quarter earnings will beat analyst forecasts as a strong housing market lifts sales.

Home Depot has centralized merchandising, consolidated regional divisions, cut full-time payroll and is overhauling its technology systems to improve profitability.

“You’ve got one company which is continuing to execute the business plan it’s had for years in Lowe’s, whereas Home Depot is in a period of repositioning its business,” Midwest Research analyst Eric Bosshard said. “As a result, things at Home Depot are getting worse before they get better.”

Shares of Atlanta-based Home Depot fell $3.69 to $24.91 on the New York Stock Exchange.