Home Depot predicts dip in annual earnings on Home Services

Jan

Home Depot predicts dip in annual earnings

posted by admin in Home Depot

The Home Depot Inc. reported Tuesday it expects its earnings for 2007 to be down 15 percent to 18 percent due to the sale of HD Supply and weaker conditions in the housing market.

The Atlanta-based home improvement giant (NYSE: HD) also said it expects total retail sales to fall about 2 percent and comparable store sales to be down mid-single digit.

In 2006, Home Depot’s net income dropped slightly to $5.8 billion as sales increased 11.4 percent to $90.8 billion.

In June, Home Depot sold HD Supply, its wholesale distribution unit, to Clayton, Dubilier %26amp; Rice, Bain Capital and Carlyle Group for $10.3 billion. Home Depot on Tuesday updated its guidance to show the unit as a discontinued operation. However, the estimated earnings per share for 2007 does not include the gain on the sale of HD Supply.

While we expect the housing market to remain challenging for the rest of 2007 and into 2008, we plan to continue our reinvestment plans for the long-term health of our business, understanding that it will put short-term pressure on earnings, said Carol Tome, Home Depot chief financial officer. We are confident that over the long term, we will deliver productivity improvements and enhance returns on invested capital as the investments take hold.

Home Depot also reported the start of a tender offer for 250 million shares of its common stock priced between $39 and $44 a share. The tender offer is part of a stock buy-back program of up to $22.5 billion Home Depot unveiled in June. The tender offer will end on Aug. 16.

The two key areas of focus for our capital allocation strategy are to invest in our core retail stores and to return capital to our shareholders, said Frank Blake, Home Depot chairman and CEO. Despite a challenging housing environment, we remain committed to both, and today’s tender launch is a clear demonstration of our commitment to returning cash to shareholders.

Lastly, the company said it plans to open 108 new stores in 2007.