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Home Depot sees sales and profits fall in 4Q

Atlanta — The Home Depot Inc. reported that sales and profits both declined during the fourth quarter, stunted by one less week of sales than last year, and wilting under the heat of stepped-up pressure from arch-rival Lowe's, which is muscling into key markets The Home Depot once called its own.

Progressively weakening throughout the year, profits slipped by 3.4 percent, to $686 million from $710 million last year. Sales were off by 2.0 percent, to $12.2 billion from $13.5 billion, as both the number of sales transactions and their size declined. Same-store sales declined by 6.0 percent.

Skewing the year-over-year comparison, the 2002 fourth-quarter is up against a prior-year period with one more week of sales, 14 weeks vs. this year's 13. Comparing equivalent 13-week periods, sales increased by 5 percent, driven by new store openings, while earnings per share grew by 11 percent.

Taking a modest bite out of the bottom line, operating costs grew higher, offsetting stronger margins. Hurt by lower sales, expenses increased by 140 basis points, or 1.4 percentage points, to 23.7 percent of sales from 22.3 percent a year ago. Average gross margin widened by 120 basis points, to 32.0 percent of sales from 30.8 percent the preceding year. Despite the lower level of sales, gross margin dollars increased by 1.6 percent, to $4.2 billion.

Reflecting greater strength earlier in the year, 12-month profits climbed by 20.4 percent, to $3.7 billion from $3.0 billion. Sales for all of last year improved by 8.8 percent, to $58.2 billion from $53.6 billion. Same-store sales for the year were flat.

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