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Home Depot Reports Slump in Quarterly Sales, Profit

Comps Fell 5.2%, Sales Down 1.2% in Second Quarter

Last week, The Home Depot said it foresees softness in the home and housing markets going into 2008 as it reported a 10% drop in second quarter earnings.

Home Depot reported a profit of $1.6 billion, or 81 cents per diluted share, down 10% from $1.86 billion, or 90 cents per share.

Earnings from continuing operations for the period ended July 29 was $1.5 billion, or 77 cents per diluted share, compared to fiscal 2006 second quarter earnings from continuing operations of $1.7 billion, or $0.82 per diluted share.

The retailer is now reflecting the results of the HD Supply segment as a discontinued operation, which impacted earnings by $66 million, or 3 cents per diluted share. Last week, Home Depot announced that it was in discussions with affiliates of Bain Capital Partners, The Carlyle Group and Clayton, Dubilier & Rice, which may restructure the previously announced agreement for the sale of HD Supply.

Sales for the second quarter totaled $22.2 billion, down 1.8%, as comps fell 5.2%.

"While the challenging housing market continues to present us with a tough selling environment, our financial performance was in line with our expectations," said Frank Blake, chairman and ceo.

Home Depot reiterated its outlook: that earnings per share from continuing operations are likely to decline by 12-15% for fiscal 2007. Consolidated earnings per share are expected to decline by 15-18% for fiscal 2007.

The Home Depot, Inc.

Qtr. 7/29 (x000) 2007 2006 % change
(loss)
* Home Depot is now reflecting the results of the HD Supply segment as a discontinued operation, which impacted earnings by $66 million, or 3 cents per diluted share, down from $161 million, or 8 cents per share. Including a tax charge of roughly $60 million, the units adjusted earnings for the quarter were $126 million.
Sales $22,184 $22,592 -1.8%
Oper. income (EBIT) 2,557 2,915 (12.3)
Net income 1,587 1,862 (14.8)
Per share (diluted) 0.81 0.09 (10.0)
Average gross margin 33.1% 33.0%
SG&A expenses 4,370 4,146 5.4
6 Months (x000) 2007 2006 % change
Sales $40,729 $41,970 -3.0
Oper. income (EBIT) 4,229 5,187 (18.5)
Net income 2,633 3,346 (6.2)
Per share (diluted) 1.34 1.60 (16.3)
Average gross margin 33.4% 33.6%
SG&A expenses 8,556 8,125 5.3


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