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Minus charge, HD profits up 30 percent

Boosted by strong sales growth, first-quarter profits at Home Depot climbed 21.1 percent, to $1.1 billion from $907 million last year.

Profits would have risen even higher but were offset by a $78 million one-time charge, stemming from a change in accounting for vendor allowances. Excluding the impact of the charge, profits shot up 29.7 percent, to $1.2 billion from $907 million a year ago.

Sales at the world's largest home-improvement retailer increased 16.2 percent, to $17.6 billion from $15.1 billion last year. The all-important measure of same-store sales improved 7.7 percent, the highest rate of first-quarter comp growth in the past five years.

"Our performance in the first quarter is the best illustration yet of how we executed our strategy to drive growth," said Bob Nardelli, chairman, president and CEO. "We continue to build on the momentum created in 2003 by staying focused on our strategy to enhance our stores, extend our business and expand our markets."

Based on the strong first quarter, the retailer has raised its estimates for sales and profit growth for all of this year, now saying sales will grow in a range of 10 to 12 percent, while earnings will grow 7 to 11 percent. Excluding the impact of the accounting change, profits would grow 13 to 16 percent.

During the quarter, the average ticket increased 7.4 percent, to $55.11, a new company record.

"We saw ticket increases in every category," said John Costello, executive vice president, merchandising and marketing. "Our appliance business delivered strong double-digit comparable store sales performance in the quarter, with increases in both units and average ticket." For a third straight quarter, sales per square foot grew 3.9 percent, to $376.80.

The Home Depot Inc.

Qtr. 5/2 (x000) 2004 2003 % chg
a-Earnings include a $78 million change in accounting for vendor allowances. Excluding the one-time charge, earnings rose 29.7 percent, to $1.2 billion from $907 million, and earnings per share were $0.52, up 33 percent from a year ago. The accounting change also had the effect of increasing average gross margin and increasing operating costs when measured as a percentage of sales.
Sales $17,550,000 $15,104,000 16.2
Oper. Income (EBIT) 1,746,000 1,448,000 20.6
Net income 1,098,000 907,000 21.1
Per share (diluted) 0.49a 0.39 25.6
Average gross margin 32.9% 32.0%
SG&A expenses 22.9% 22.4%


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