By Paul Ziobro
Home Depot Inc. reported strong sales growth helped by healthy
spending among wealthier Americans in an improving housing
market.
Sales rose 6.1% at stores open for more than a year, including
7.1% in the U.S., in the first quarter, sending earnings 15% higher
for the period. The company increased its sales and profit forecast
for the year.
Chief Financial Officer Carol Tome said that about half of Home
Depot shoppers live in homes valued at more than $200,000 which
have experienced a stronger recovery over the last six years than
those in low-income households.
"The nature of our customer base is helping drive this growth,"
Ms. Tome said on a conference call. Shares of Home Depot, up 8% so
far this year, fell 0.7% in midday trading to $113.57.
In a weak retail environment, home improvement-stores such as
Home Depot remain an outlier with consumers showing more of a
willingness to spend money replacing windows and upgrading
countertops than to splurge on fashion and everyday goods. TJX Cos.
on Tuesday said sales at its discount home-focused chainHomeGoods
rose 9%, much faster than the 3% growth at its fashion-focused
siblings T.J. Maxx and Marshalls.
Wal-Mart Stores Inc. on Tuesday reported a scant 1.1% same-store
sales growth at U.S. stores in the first-quarter, and other
retailers such as Macy's Inc. and Kohl's Inc. have reported weak
sales in the first months of the year.
Shares of Home Depot, up 8% so far this year, fell 0.7% in
midday trading to $113.57.
Recent government data has fueled optimism that the housing
market is picking up after a slow winter. U.S. housing starts rose
20% in April to a seasonally adjusted annual rate of 1.14 million,
the highest level since November 2007. New applications for
building permits, which shed a light on construction over the
coming months, rose 10.1%.
Home Depot anticipates more upside in the housing rebound
because home values haven't completely recovered to the highs hit
before the recession. Having spent the recession focusing on
maintenance and repairs, homeowners are now willing to consider
bigger outlays such as redoing their kitchens or bathrooms.
"There's still room to recover," Ms. Tome said in an
interview.
Consumer's investment mindset helped fuel a 6.8% increase in the
number of sales of more than $900, as people bought items such as
riding mowers, water heaters, windows and sheds. Smaller
transactions grew less than half as fast, primarily due to the
garden business, where purchases of soil and seed would come in at
less than $50.
Home Depot's sales are being driven by more people coming into
its stores, as the number of transactions rose 4.6% in the period.
Average ticket rose 1.8% to $58.60. Online sales grew 30% in the
quarter, but remain a small fraction of the company's total sales,
which grew 6.1% to $20.9 billion.
Overall, the company reported earnings of $1.58 billion, up from
$1.38 billion, a year earlier. Results were helped by a $71 million
tax audit settlement.
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 on the issue 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's first-quarter results included $7 million in
breach-related costs, though Home Depot said it can't yet estimate
the full scope of costs related to the breach.
--Chelsey Dulaney contributed to this article.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
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