Earnings at Home Depot Rise by 39%

Home Depot Inc., the world’s largest home-improvement chain, said Tuesday that fourth-quarter profit climbed 39%, the fastest pace in two years, because store remodeling and the company’s first holiday-marketing effort boosted sales.

Net income rose to $951 million, or 42 cents a share, from $686 million, or 30 cents, a year earlier, the Atlanta-based company said. Revenue in the quarter ended Feb. 1 increased 14% to $15.1 billion, and sales at stores open at least a year rose 7.6%, topping Lowe’s Cos. for the first time in more than two years.

Chief Executive Robert Nardelli almost doubled the investment in store remodeling last year, while adding new appliance departments and exclusive products such as Ridgid tools to compete with Lowe’s. He also spent more on advertising, distributing a holiday catalog and marketing gift cards.

Home Depot, which had 1,707 stores on Feb. 1, reiterated its goal for earnings to rise as much as 14% in 2004, with a sales gain of as much as 12%.

The company had been expected to report that same-store sales increased 7.4%, with profit of 39 cents, according to analysts surveyed by Thomson Financial.

Shares of Home Depot rose 61 cents to $35.99 on the New York Stock Exchange.

Lowe’s, the No. 2 home-improvement chain with about half Home Depot’s sales, said Monday that fourth-quarter profit rose 28% and sales at stores open at least a year rose 7.3%. First-quarter and annual profit will rise less than analyst forecasts as sales slow, the company said.

Record housing sales last year and strong consumer confidence are leading more people to spend on their homes, Nardelli said. “This year might be the second-biggest year in history” for housing, Nardelli said. “If you are in retail, there is no sweeter spot than home improvement.”

Nardelli last month announced plans to spend $1 billion on modernizing older stores by adding wider aisles, larger signs and shiny floors -- features that have lured customers to Lowe’s. About $500 million in spending last year to drop Home Depot’s warehouse-style look helped attract more customers, Nardelli said.