Home Depot’s plans nailed by turmoil in the markets on Home Services

Jan

Home Depot’s plans nailed by turmoil in the markets

posted by admin in Home Depot

The Home Depot Inc. (HD, NYSE, 12-month range $33.80-$42.01) is a home improvement retailer that operates approximately 1,800 stores in 49 states, including Hawaii. It also has stores in Puerto Rico, the U.S. Virgin Islands, Mexico and Canada.

The recent turmoil in the credit markets and the weakness in the housing market are affecting Home Depot’s plans to sell its supply unit as well as the price range in its Dutch Auction to repurchase 250 million of its shares.

The company had announced its intention to sell its supply division and expected to receive $10.3 billion in the transaction, based on discussions with affiliates of Bain Capital Partners, the Carlyle Group and Clayton, Dubilier %26 Rice, potential buyers. Home Depot is now saying that the price will be lower than expected with analysts speculating that the buyers are having difficulty obtaining financing for the deal in the credit markets.

Home Depot also had announced that the price range for its share repurchase auction would be between $39 and $44 per share. It now has lowered the range to $37 to $42 per share. If the sale of the supply division falls through, the company expects to reduce the $22 billion repurchase to only $12 billion.

The slumping nationwide housing market, now estimated to be at its worst since the boom started in 2002, is putting pressure on lenders.

Confirmation of Home Depot’s weakness was evident in its earnings of $1.59 billion, or 80 cents per share, in the second quarter, ending July 29, compared to $1.86 billion, or 90 cents per share, in the year-earlier period.