Home Despot warns of lower earnings..........(Starch)

Joe Brix

Jul 10, 10:03 AM EDT


Home Depot Warns of Earnings Decline

By HARRY R. WEBER
AP Business Writer





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ATLANTA (AP) -- The Home Depot Inc., the world's largest home improvement store chain, warned Tuesday that its earnings will decline this year more than previously expected because of weak conditions in the housing market and the sale of its wholesale distribution business.

The Atlanta-based company said it now expects its earnings per share to decline by 15 percent to 18 percent for fiscal 2007. In May, the company had projected an earnings per share decline of 9 percent for the year.

The earlier guidance included an estimated 18 cents of earnings per share contribution from the company's HD Supply unit for the last six months of the fiscal year.

Last month, Home Depot said it was selling the unit to a group of private equity firms for $10.3 billion. Home Depot said Tuesday it was updating its guidance to reflect the unit as a discontinued operation.

The company said it expects total retail sales to be down 1 percent to 2 percent for the year and sales at stores open at least a year to be down in the mid-single digit range.

"We look at the overall market and say there's still correction that lies ahead of us," Chief Executive Frank Blake, referring to the housing market, told investors hours after Home Depot gave the lowered guidance. "But again, we're pretty far along in the correction process."

At the same time, Blake said Home Depot sees "continued headwinds through 2007 and probably some into 2008 as well."

Blake said Home Depot still faces operational challenges. He noted Home Depot has been underperforming compared with others in its market. He said Home Depot is working to improve customer service, in part by giving employees financial incentives for doing good work.

The revised fiscal 2007 earnings per share targets reflect 52 weeks and do not include the impact of the 53rd week. The company will have 53 weeks of operating results in its fiscal 2007 financial results. Home Depot projects that the 53rd week will add approximately 3 cents to its consolidated earnings per share guidance for fiscal 2007.

The company said its updated earnings per share guidance does not include the gain on the sale of HD Supply.

Chief Financial Officer Carol Tome said the company remains "confident that over the long term, we will deliver productivity improvements and enhance returns on invested capital as the investments take hold."

Also Tuesday, Home Depot said it was launching a tender offer for 250 million shares of its common stock at a price range of $39 to $44 per share. The tender offer is scheduled to expire on Aug. 16. Home Depot shares have been trading recently at around $40 a share.

Last month, the company announced a stock repurchase program in which its board had authorized the company to buy back up to $22.5 billion of Home Depot stock. The tender offer is part of that plan. At the midpoint of the tender offer's price range, the 250 million shares represent less than half of the value of the total stock repurchase authorization. Home Depot has said it wants to complete the stock buyback plan as quickly as possible. Tome said Tuesday that Home Depot is using a phased approach to its stock repurchase program.

Home Depot, which has more than 2,000 stores in the United States, Canada, Mexico and China, said Tuesday it will open approximately 108 new stores in fiscal 2007.

Home Depot shares rose 21 cents to $40.44 in morning trading Tuesday.

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Mike T., Swampeast MO

Not just Home Depot. Lowes is seeing a pinch as well with same-store sales falling significantly.

Locally at least Lowes is offering "12 months same as cash" for larger purchases.

Frankly I see a national economic downturn on the horizon the "natural" severity of which will be enhanced by unusual circumstance. "Higher end" home construction and renovation will be among the hardest hit.

Locally the real estate market is flooded with "spec" and virtually new homes in the 250K - 350K range. That might sound cheap to many of you, but around here that's near the top of the high end. LOTS of foreclosures at the bottom end of the housing spectrum and such might (based on how many higher end homes rapidly being put up for resale) might make a jump to the top as well.

Building permits of all sorts--commercial, residential, new, remodel--are dropping not only in number but in cost of such.

After nearly two decades of retail space explosion--much of it "big box"--such has dropped to a comparative trickle. Significant local "incentives" were offered to such by the city council mainly at the urging of the mayor who claimed increased sales tax revenue would far offset the cost. I tried to warn him, but he didn't want to listen. The city limits were VASTLY expanded during the same time--much for extremely low-density (think acre+ lots) residential development. The main impetus for the expansion was providing city services and recently public water and sewer--not only to new construction but for older developments with cheap, crappy asphalt streets where residents faced HUGE bills for state-required improvements. Again, I tried to warn the mayor but to no avail. I know him personally and through business and he always replies, but kept insisting, "Increased sales tax revenue will cover it all".

Guess what? Sales tax revenue has gone flat. With sales tax providing more than 50% of the city's operating budget and a MUCH larger area to provide services, it's actually declining... Mayor is crying the revenue blues and even trying to change Missouri law to allow the city to impose a "local payroll" tax (only St. Louis and Kansas City can do so now).

Steamhead (in transit)

I'm sure this is one reason why

http://www.wbaltv.com/news/13649704/detail.html

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mtfallsmikey

And the other reason...

Just like the early 70's, early 80's recessions...High fuel costs, translating into higher manufacturing/transportation costs, higher utility rates,more inflation. Gas prices have risen in my area 20 cents from a week ago. The consumer has less to spend, mortgage rates going up, with wages stagnant. but here in the suburbs of D.C. commercial construction is still going gangbusters. Residential construction is way down.Right now I'm glad i have the job that I have, virtually 0% chance of a layoff.

D107

So why is Depot planning to open 108 new stores??????????

Woke up to news story yesterday that a local hardware store is going out of business; owner says Depot is selling fertilizer for the price he BUYS it at.

Kal Row

it's a shame.. cause the only thing...

the local store needs to have done to compete is open more hours, the customers that buy "price" only, are useless even if there was no home despot - you don’t want those types - whereas for the ones that buy product and support - you should have no problem competing with the big box for - i always go to the local guy first if open - cause if i don’t, i wont have'em when i need'em - so the only legit thing the big box squeezed out of the little guy is more hours of their personal life, tough, that’s capitalism, perhaps the home despot should have been forced to keep the original 24hr schedule that they had used to knock everyone else out with

DanHolohan

Perspective

I just bought this catalog, which shows what Sears could do during the 1940s. Somehow, the professional heating & plumbing contractor managed to survive.

Sears

mtfallsmikey

Dan: is there an automobile listed in that catalog?

Along about that time, maybe in '50 or 51', Sears sold an auto...yes!..It was an Allstate brand, but really a rebadged Henry J. made by Kaiser-Willys.

DanHolohan

No,

> Along about that time, maybe in '50 or 51', Sears

> sold an auto...yes!..It was an Allstate brand,

> but really a rebadged Henry J. made by

> Kaiser-Willys.



that's the whole catalog. They once sold entire houses.

DanHolohan

No,

that's the whole catalog. They once sold entire houses.

Dave Yates (GrandPAH)_1

what goes around........

if you're selling widgets and you're a Mom & pop operation, the massive widget sellers will win every time for a long time, but what goes around, comes around.

When I was a young lad (shut up Milne!), the butcher, baker and milk-man came to our home in their mobile truck-shops. Mom & Pop corner grocery stores sprang up, which killed off the delivery business because the corner grocery store was more convienant and just about everyone was buying cars. When transportation became a breeze, I remember we would go to the (then huge - now tiny) grocery store & the aroma of fresh-ground 8-O'Clock coffee was a slice of olfactory heaven. Grocery stores did in the Mom & Pop corner grocery stores. Next came larger grocery stores that put out the small stores and now we see mega-stores that stretch on for what seems like miles. No need to go to exercise class - go food shopping instead! Along the way, up sprang "convienence stores", which are a twisted-sister rebirth of the Mom & Pop stores - except their prices are the highest you'll find anywhere and are now the profit-centers for their parent companies.

See where I'm going here? Menards, HD & Lowes have all pushed to outsize each other. The Mom & Pop hardware stores will be back, only Mom & Pop won't be running them and they'll be just one of a much larger chain of "convienence stores". The thing missing will be what's missing at Wegman's or The Giant Superstores - the personal touch & warm relationships.

And that's where you & I have it all over any of these so-called competitors. Unless, of course, you don't provide the value in value-added service.

Farmers' Markets have survived the entire cycle. The one I manage is 45,000 sq ft in a wonderful timber-framed building built in 1887 & sits in center city York. Our farmers don't compete with the Wegman's or Giant Superstores - they don't need to - never did - never will - as long as humans desire human interaction where friendships are free to develop and service with a smile really does mean exactly that. And, who knows farming better than the very farmer that grew the produce or butchered the meats? Who knows PHVAC better than you? It sure as heck isn't the sales folk at the big box DIY sales center.

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John R. Hall

No offense guys...

But every time Big Orange sneezes, the Wall catches a cold. Heating professionals will survive.

Joe Brix

Some parts of Long Island

Have a HD every 2 blocks. Lowes only has 3 open stores with more on the way. They're just stealing sales from each other.

Mike T., Swampeast MO

Farmer's markets do well here also, but you have to watch out as some of them sell produce from commercial sources. Tomatoes are especially problematic. SE Missouri tomatoes are among the finest I've ever eaten, but you just don't get many until mid-July and they are at their best in August.

Dave Yates (GrandPAH)_1

same her

but our farmers mark out-of-town produce as just that and locally grown gets signage too. There's a number of wholesale houses where they drive to survey the produce and select grades they wish to resell. Since theirs is a small operation, their produce is fresher and in much better shape.

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Maine Doug_65

Farmers Markets and such

Near my place in Frderal Hill in Baltimore is a new ACE Hardware a block from the Cross Street Market. It is nice to walk to both. The hardware went into an old dollar store location. All gussied up with new lights, paint etc. We see neighbors and the gang that run the place are great.

In the market we almost daily pick out produce, visit the Italian or German bakery, get couple of fresh newly cut pork chops to go with a spinach and cheese sauce, maybe a cut flower for the table. And sometimes a beer at Big Jim's deli to go with a sandwhich. Load up our stuff in the granddaughter's stroller and head home.
What is interesting is that we can do the same in the Maine town of 5000 where I also live. In both cases Home Despot is a 20 mile event so shopping at the local places is ultimately cheaper and much more enjoyable.

In my glass shop where I was selling stained glass by the square foot, I had a customer that would come in now and then. I asked how my prices compared to the other shop she used about 1.5 hours away. She said she got 20% off at the other store. I asked her to bring some invoices in and I will see what we can do. Turns out the 20% off was +/- 5 to 10 cents from my everyday price. When I explained this the answer was "but they give me 20% off". I tried to show that my price was the same as the 20% off price but without the travel time and gas. You guessed it, "but they give me 20% off". I wished her happy travelling.

Steamhead (in transit)

Is that

the old dollar store on Light Street?

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Maine Doug_65

Yes

It has been totally remodeled. And there is a new I think coffee type shop going in the next block. And Maria D's makes my Stuffed Shells.