By Suzanne Kapner
Home Depot Inc. said strong demand from small professional
contractors for everything from compressors to roofing helped boost
sales in the latest quarter, a sign of strength in the housing
market.
Small contractors play an large role in Home Depot's business,
accounting for 3% of customers and 35% of its sales, according to
Chief Financial Officer Carol Tomé.
"Their health is a proxy for the housing market," Ms. Tomé said.
"As housing recovers they have work and are spending more in our
stores."
Under Craig Menear, who became chief executive last year, Home
Depot has sought to improve on recent steady sales growth. The
home-improvement chain, like its smaller rival Lowe's Cos., has
been one of the main retail beneficiaries of the improving U.S.
housing market as consumers pursue renovations and other projects.
Earlier this month, the company said it would hire 80,000 workers
for the spring and summer season this year, matching last year's
level.
The growth in home prices last year came in less than the 5% to
6% that Home Depot was expecting. Prices in 2014 rose 4.6%, their
slowest gain in three years, according to the S&P/Case-Shiller
Home Price index report.
Home Depot still managed to post healthy sales and profit gains
that beat analyst expectations. "We had great relative performance,
because we took market share," Ms. Tomé said in an interview. In
the three months to Feb. 1, sales rose 7.9%, excluding newly opened
or closed stores.
Shares of Home Depot, up 44% over the past year, rose 3.7% in
afternoon trading.
For 2015, Home Depot said it expects sales growth to slow to
between 3.5% to 4.7%. At current exchange rates, the company
estimated that the strong dollar would bring down its 2015 sales by
$1 billion.
Consumers have also benefited from lower gas prices, though Mr.
Menear said Home Depot hasn't been able to correlate the lower
prices to higher spending by its customers. Ms. Tomé said it was
possible that customers weren't spending the money they saved on
gas.
Home Depot also has had to contend with the aftermath of a
widespread data breach last year. The company has said it faces
several dozen civil suits related to the breach in which millions
of customers' credit-card information and emails were stolen. To
combat future thefts, the company has completed a project to
encrypt credit-card data at the point of sale.
The company said expenses related to the data breach totaled $63
million in 2014, though the amount falls to $33 million after
factoring in what the company expects to get back from
insurance.
Overall, earnings for the period rose 37% to $1.38 billion. Net
sales increased 8.3% to $19.16 billion. The quarter's results
included a $111 million gain on the sale of a portion of the
company's ownership in HD Supply Holdings Inc.
Home Depot also boosted its quarterly dividend by 26% and
authorized an $18 billion share repurchase program to replace its
prior authorization.
Michael Calia
and
Chelsey Dulaney
contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
Access Investor Kit for The Home Depot, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US4370761029