Home Depot Ratchets Up Fiscal-Year Guidance -- 3rd Update
November 13 2018 - 5:48PM
Dow Jones News
By Allison Prang
Home Depot Inc. reported third-quarter earnings that rose
sharply from a year earlier and again raised its full-year guidance
as the retailer benefited from strong demand in the
home-improvement business.
However, the company said it would continue to face tougher
comparisons because of last year's hurricanes, which prompted a
surge in sales related to rebuilding areas damaged by storms.
Home Depot's profit rose 32% to $2.87 billion, or $2.51 a share.
Analysts polled by Refinitiv expected earnings of $2.26 a share.
The retailer's provision for income taxes fell by about $489
million from a year earlier, which helped bolster profit.
Net sales grew 5.1% to $26.3 billion, helped by an increase in
customer transactions and average price per customer transaction.
Analysts polled by Refinitiv expected $26.26 billion. Same-store
sales grew 4.8%, ahead of the 4.7% expected from analysts polled by
Consensus Metrix.
Chief Executive Craig Menear said on the company's earnings call
Tuesday that "overall the environment for home improvement is
solid," but noted that comparisons for the U.S. Gulf region were
harder this quarter because of Hurricane Harvey, the storm that hit
the Texas area in 2017.
"While this quarter brought hurricanes Florence and Michael, the
scope of devastation was more compact from a geographical
perspective," he said.
Home Depot's Chief Financial Officer Carol Tomé said the company
logged about $282 million in hurricane-related sales in the third
quarter last year, compared with about $150 million this year. In
the fourth quarter, the company will be competing against about
$380 million in hurricane sales it made in the fourth quarter a
year ago, she said.
"While we do expect to get hurricane-related sales in the fourth
quarter, we don't expect to get $400 million worth of
hurricane-related sales," she said.
Home Depot said it now expects full-year sales to grow by about
7.2% from a year earlier -- or 5.5% when excluding the 53rd week in
the current fiscal year. The company had expected sales to rise
about 7%, or about 5.3% excluding the extra week. The company
expects profit for the year to be $9.75 a share, compared with its
prior forecast of $9.42 a share.
The higher earnings guidance includes stronger activity around
share buybacks. Home Depot said Tuesday it now expects about $8
billion in share repurchases for the year. The company had expected
to complete $6 billion in share buybacks.
Wells Fargo analysts said in a note that Home Depot "continues
to outpunch its weight" given the context of hurricanes and other
factors, but added that investor sentiment has waned in recent
months. "While (Home Depot) managed to deliver relatively solid Q3
results, we see little in today's report to challenge an
increasingly tricky narrative around rising rates, slowing home
turnover and the potential for a FY19 slowdown," the analysts
said.
Analysts pressed Home Depot on the call to discuss whether
weaker housing-sector data of late were reasons to be less
optimistic about the company's prospects. Ms. Tomé said the company
was confident in its forecasts as a result of factors including
strong U.S. economic growth, the age of housing stock and
home-price appreciation driving activity.
"Housing is very local and when you get into the areas of
home-price appreciation and affordability...it's really local," she
said on the call. "So we went market-by-market to see, are we
seeing any measurable impact on our sales and we just can't see
it."
Shares of Home Depot closed Tuesday down 0.2% to $179, bringing
their decline so far this year to 5.6%.
Write to Allison Prang at allison.prang@wsj.com
(END) Dow Jones Newswires
November 13, 2018 17:33 ET (22:33 GMT)
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