Home Depot and Lowe’s, the two largest US home-improvement chains, have issued cautious forecasts for the final holiday quarter of the year, despite reporting strong figures for their third quarters.

For the quarter ending 1 November, Home Depot saw its net profit drop by 8.9% year-on-year to $689m (41 cents a share), but that beat expectations of earning of 45 cents a share. Sales in the quarter were also down a less-than-expected 8% to $16.4bn, while US same-store sales fell by 7.1%.

Home Depot raised its full-year earnings (excluding one-off items) to $1.55 a share, from $1.42 a share to $1.52 a share. However, that implies a fourth-quarter profit of 13 cents a share, or 3 cents below the average analyst forecast.

In media comments, CFO Carol Tome added that she expects the first half of 2010 to be soft in terms of consumer demand, with some improvement coming in the second half of the year. She noted, “There's nothing out there that says ... consumers are going to come back with a vengeance”.

The chain added that it sees more room for cost cuts and expects "modest" expansion in gross margin in the current quarter. It also said it said it sees further signs of stabilization in the markets that were hardest hit by the housing crisis, such as California, Florida and Arizona.

Meanwhile, smaller rival Lowe’s saw its net profit drop by 29.5% to $344m (23 cents a share), meeting analysts’ estimates. Sales were down 3% to $11.4bn, while same-store sales dropped by 7.5%. That latter result was an improvement on the 9.5% fall recorded in the second quarter. The group said the value of the average transaction dropped 6.7% in the quarter, and it also recorded a “fractional” decline in customer traffic.

CEO Robert Niblock said the group expected revenue to be unchanged this year as falling home values and rising unemployment make consumers cautious. It also revised its forecast to earnings of $1.16 to $1.20 for the full year, compared to a forecast of $1.13 to $1.21 a share made in August. The group is forecasting same-store sales to drop by 2 to 6% in the current quarter.

NamNews - Wednesday 18th November 2009

 

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