Home Depot’s Earnings Rise 21%
Home Depot Inc., the world’s largest home-improvement chain, said Tuesday that fiscal first-quarter earnings climbed 21% as the remodeling of older stores and demand for John Deere lawn tractors helped sales. The retailer boosted its annual profit forecast.
Net income increased to $1.1 billion, or 49 cents a share, from $907 million, or 39 cents, a year earlier, the Atlanta-based company said. Revenue in the quarter ended May 2 climbed 16%, the biggest gain in two years, to $17.6 billion.
Chief Executive Robert Nardelli, who took over in December 2000, is spending $1 billion this year to add larger signs, brighter lighting and self-checkout lanes to aging stores, as the retailer fends off competition from Lowe’s Cos. As remodeling improves sales, the pace of the turnaround might be slowed by rising mortgage rates and gasoline prices, investors say.
“The biggest challenges for Home Depot and all of home-supply retailers are the economy and the effect of higher interest rates,” said Michael Farr of Farr Miller & Washington in Washington. “People are not going to have the same liquidity or same money to spend on home improvements.”
Annual profit will rise as much as 14%, compared with its 11% forecast in February, Home Depot said. The company said sales would be at the top end of its prior forecast, or as much as a 12% gain.
Shares of Home Depot rose $1.15, or 3.4%, to $34.62 on the New York Stock Exchange. The shares had fallen 5.7% this year amid concerns about higher interest rates.
Sales at stores open at least a year, a key measure of retail health, increased 7.7%, the biggest first-quarter gain in five years.
Among the new products Home Depot has been selling are John Deere Gator utility vehicles and Maytag SkyBox home beverage dispensers.
The company had 1,740 stores at the end of the quarter after opening 33 in Canada, Mexico and the United States.
Home Depot is developing new store prototypes, including flooring-products stores and its first multilevel store, which opened in Chicago last year. That outlet will be used as a model for the company’s first stores in Manhattan, planned for this year.
Home Depot said appliance sales rose more than 10% after the company added new displays for washers and dryers, and home installation services rose 42%.
