Home Depot boosted by early signs of U.S. housing recovery

Tue Feb 26, 2013 5:00pm EST
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By Dhanya Skariachan

(Reuters) - Home Depot Inc (HD.N: Quote) posted better-than-expected earnings on Tuesday, helped by a nascent recovery in the U.S. housing market and rebuilding efforts in the wake of Hurricane Sandy.

The results came on the same day the U.S. Commerce Department said sales of new U.S. single-family homes jumped 15.6 percent to a 4-1/2 year high in January, raising hopes that the U.S. housing market was indeed recovering.

The world's largest home improvement chain also forecast higher sales and earnings per share for the current fiscal year, an outlook that analysts thought might even be somewhat conservative. Its shares gained nearly 6 percent.

For the 15th straight quarter, Home Depot also bested its rival, Lowe's Cos Inc (LOW.N: Quote), in sales performance at established stores, pointing to an ongoing dominance that analysts say Lowe's is far from overcoming.

"They are getting the assortment right," said Robin Diedrich, analyst at Edward Jones, referring to merchandise in stores. "This quarter is a kind of perfect example of that where they really seemed to have gone after the holiday market, in a much bigger way than Lowe's did."

She added: "Just really executing on the right product at the right price goes a long way."

Better pricing and customer service have helped Home Depot take market share from Lowe's. The industry leader has also benefited from having more centralized distribution centers and from recent efforts to shift more employees to jobs where they serve customers directly. A return to more locally targeted marketing and merchandising has also helped.

Home Depot said it expected overall sales to rise about 2 percent and sales at stores open at least 12 months to increase about 3 percent in this fiscal year, which began on February 4. Chief Financial Officer Carol Tome told investors the U.S. housing recovery would contribute 100 basis points of the company's anticipated same-store sales rise.   Continued...

A sign outside The Home Depot store is pictured in Monrovia, California August 13, 2012. REUTERS/Mario Anzuoni