Home Depot's Q1 Net Earnings Saved by Expo Sale

Home Depot, which turns 30 years old in June, benefitted in the first quarter despite economic challenges, thanks to its sale of its now defunct Expo Center business last year.

The country's largest home improvement chain reported net earnings of $514 million, or 30 cents per diluted share, for the first quarter compared with net earnings of $356 million, or 21 cents per diluted share, in the same period last year.

"First quarter of 2009 results reflect a net impact to operating profit of $117 million related to the closing of the Expo businesses," the company said.

In the first quarter of 2008, the company's reported results included charges of $543 million associated with its store rationalization plan. On an adjusted basis, Home Depot reported first quarter of fiscal 2009 net earnings of $587 million, or 35 cents per diluted share, compared to adjusted net earnings of $697 million, or 41 cents per diluted share, in the same period of fiscal 2008.

But the chain otherwise suffered in sales, which for the period declined 9.7% to $16.2 billion. Comparable store sales also disappointed, dipping 10.2%, as did comp sales for U.S. stores, which went down 8.6%.

Product category highlights not surprisingly came in the form of outdoor seasonal and some "simple repair and décor" areas, said Craig Menear, evp, merchandising.

"Seasonal categories related to outdoor projects showed flat or positive growth in the quarter," he said, adding that basic repair and maintenance categories "remained resilient across the country" and "simple remodel and décor categories gained some strength in the quarter."

The latter, he explained, include categories "that help customers update their homes in cost- effective ways, such as special-order carpet, in-stock carpet and window coverings."

As a result of "softness" in construction and discretionary categories, Home Depot's average ticket for the first quarter was down 8.2% to $52.67. For average tickets of $50 and below — representing roughly 20% of the retailer's business in the U.S. — sales were basically flat year over year. In average tickets of $900 and above — which similarly represent about 20% of Home Depot's U.S. business — sales were down around 15%.

As the Home Depot now heads "into the heart of our spring selling season," Menear said, "we feel good about our execution."

More aggressive pricing strategies are a focus going forward, he added.

"We utilize our assortment management tools to refine our seasonal assortments and strengthen the value segments in opening and middle price points," Menear said. "We feel confident that we will aggressively drive value for our customers while maintaining a disciplined control over the business in this challenging environment."

In other company news, Home Depot is welcoming back Bill Lennie, this time appointing him to svp of international merchandising.

Lennie was formerly with Home Depot, lastly as svp, merchandising-décor, before he left the company in fall 2006 "to pursue opportunities outside the home improvement industry," Home Depot said in an press release at the time.

"We couldn't be more happy to have him back," Menear said.

Home Depot operates 2,238 retail stores: 1,973 in the United States,178 in Canada, 75 in Mexico and 12 in China.

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