Housing Meltdown = Home Depot Meltdown

Discussion in 'Stocks' started by ByLoSellHi, Feb 20, 2007.

  1. Home Depot Has Biggest Decline in Profit on Housing (Update6)


    By Mark Clothier

    Feb. 20 (Bloomberg) --
    Home Depot Inc., seven weeks after ousting Chief Executive Officer Robert Nardelli, reported its biggest profit drop as a decline in U.S. home sales sapped demand for building supplies. Earnings and sales trailed analysts' estimates.

    Fourth-quarter net income slumped 28 percent to $925 million, or 46 cents a share, from $1.29 billion, or 60 cents, a year earlier, the world's largest home-improvement retailer said today in a statement. Excluding executive severance, Home Depot said profit would have been 50 cents. The average estimate of 19 analysts surveyed by Bloomberg was 51 cents.

    Home Depot's retail sales dropped for the first time in four years, while sales in older stores fell for a third straight quarter. New CEO Frank Blake called the retail unit's performance ``disappointing'' and said gaining market share is his main focus.

    ``The challenge for Home Depot is that fundamentals are still weak, very weak, and are continuing to decelerate,'' Arun Daniel, a senior analyst at ING Investments LLC in New York, said. The firm has $40 billion in assets, including Home Depot stock.

    Sales for the three months ended Jan. 28 rose 4 percent to $20.3 billion. Analysts predicted revenue of $20.81 billion.

    Home Depot shares fell 44 cents, or 1.1 percent, to $41 as of 9:38 a.m. in New York Stock Exchange composite trading. They had gained 3.2 percent since the last close before Blake took over on Jan. 3. They slumped 7.9 percent during Nardelli's six- year tenure, while Lowe's more than tripled. Atlanta-based Home Depot ousted Nardelli over compensation on Jan. 2.

    Losing Market Share

    Home Depot lost market share in its retail business last year, Blake said on a conference call with investors and analysts today. He began the call with what he called an ``obvious comment. 2006 was a challenging year for us.''

    The drop of 13 percent in U.S. residential construction last year was the biggest annual decline since 1991. Sales of existing homes fuels spending for paint and cabinets as many sellers make improvements and buyers remodel.

    Selling, general and administrative costs rose 11 percent to $4.59 billion. Sales in older stores fell 6.6 percent. Michael Cox, an analyst with Piper Jaffray, estimated a 5 percent drop. The total sales gain was Home Depot's smallest in four years.

    Average Purchase Price

    Sales at the retail unit dropped 2 percent to $17.4 billion. The price of the average customer purchase fell 93 cents to $56.27 and the number of retail transactions dropped to 304 million from 308 million. Sales in the supply unit grew 64 percent to $2.9 billion in the quarter.

    Home Depot said today it will update sales and profit forecasts at its analyst and investor conference Feb. 28.

    The company's wholesale division, which makes up 12 percent of sales, supplies homebuilders. The unit, expanded through 34 acquisitions since 2004, may be sold or spun off, Home Depot said Feb. 12. Home Depot sales have grown an average of 12 percent the past three years, trailing 18 percent growth at Lowe's.

    Home Depot gained in the University of Michigan's annual survey of customer satisfaction, narrowing the gap with Lowe's. Home Depot, whose standing with shoppers in the survey dropped the past six years, rose to 70 from 67 on a scale of 100, according to the university's American Customer Satisfaction Index that was released today. Lowe's dropped four points to 74. The average score for specialty retailers was 75.

    Of 22 analysts rating the company in the past 12 months, 12 have it at ``buy,'' eight say ``hold,'' and two recommend selling.

    (To listen to Home Depot's conference call at 9 a.m. New York time, see {LIVE <GO>}.

    To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net
    Last Updated: February 20, 2007 09:40 EST
  2. Didn't they "pay" Nardelli $200 mil to walk? Or was it some kind of ransom or something?
    Anyway, any company that pays anybody $200mil is full of fraudsters and the stock is going nowhere for a long time.

    You think looting only happens in Baghdad? It happens in America's big corporations, only in a more "civilized" way.:mad: