By Dow Jones Business News, February 26, 2013, 08:53:00 AM EDT
--Same-store sales jump 7%, highest figure since 2004
--Gap in comparable sales over Lowe's is widest since Home Depot has outperformed rival
--Conservative outlook undermines otherwise stellar report
(Updates with further details and context throughout)
By Joan E. Solsman
Home Depot Inc.'s ( HD ) fiscal fourth-quarter earnings climbed 32% on a surge in sales, with the housing recovery and
rebuilding from Hurricane Sandy propelling it to outstrip smaller rival Lowe's Cos. ( LOW ) by the widest margin yet.
The country's biggest home-improvement retailer also unveiled a suite of impressive shareholder returns, but
unexpectedly weak predictions for the new year undercut an otherwise superlative report.
Shares recently were up 1.5% at $64.90 premarket. As investors flock to equities poised to benefit from the housing
recovery, Home Depot's stock has surged, last month hitting a 13-year high.
Sales at the Home Depot's do-it-yourself warehouses open longer than a year jumped 7%, the highest such turnout since
It also marked yet another quarter outperforming Lowe's, which reported a 1.9% increase in same-store sales Monday.
The differential between their figures is the widest since Home Depot began outstripping Lowe's in 2009.
Chief Executive Frank Blake said continued recovery in the housing market coupled with repairs from Hurricane Sandy
drove the performance.
Home Depot's internal struggles before the housing downturn prompted it to make transformational changes earlier than
others, putting it on course to gain market share through the economy's slow recovery. Previously sober about how
warming real-estate trends were benefiting its business, Home Depot has recently has begun to note the building
The company also recast its priorities in shareholder returns. It authorized a $17 billion share repurchase program,
raised its quarterly dividend 34% to 39 cents a share and targeted a 50% dividend payout ratio. That compares to a
dividend payout ratio of about 42% over the last five years, according to data from Thomson Reuters.
However, its outlook was weak. For the 2013 fiscal year, Home Depot said it expects per-share earnings of about $3.37.
Even as it reported one of its most impressive quarters of outperformance on sales, it predicted same-store sales
growth this fiscal year of about 3%, while Lowe's Monday forecast 3.5% growth in its own longstanding stores.
Home Depot has a track record of conservative guidance, though. Last year, it raised its earnings projection every
Janney analyst David Strasser said Home Depot's weaker-than-expected outlook could be cause for discussion and concern
Tuesday. But he noted that the same-store sales forecast was only modestly better than projections for growth in the
"With a strengthening housing market and continued share gains, we believe this guidance could prove conservative," he
said in a note to clients.
For the quarter ended Feb. 3, Home Depot reported a profit of $1.02 billion, or 68 cents a share, compared with a
year-ago profit of $774 million, or 50 cents a share. The latest period included a favorable adjustment to a previously
announced China store closing charge of about a penny a share. Stripping this out, per-share earnings for the quarter
were 67 cents.
Sales rose 14% to $18.25 billion.
Analysts polled by Thomson Reuters had most recently forecast earnings of 64 cents on revenue of $17.7 billion.
Home Depot noted that the extra week in the fourth quarter of 2012 added about $1.2 billion in revenue versus the
year-ago quarter. The extra week increased per-share earnings by about seven cents.
Gross margin narrowed a hair to 34.9% from 35%.
-Saabira Chaudhuri contributed to this article.
Write to Joan E. Solsman at firstname.lastname@example.org
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