Home Depot’s first-quarter earnings tumbled by 66 per cent after the world’s largest home improvement retailer was hit by costs from store closings and scrapping new stores, as well as a worsening housing market.

Net income fell to $356m, or 21 cents a share, from $1.05bn, or 53 cents, a year ago.

The closing of 15 stores and the decision not to go ahead with a further 50 planned locations cost the company $543m in the quarter.

Excluding these expenses income was 41 cents a share, beating analysts’ estimates according to Bloomberg by four cents.

Total sales fell 3.4 per cent year-on year to $17.9bn, and by 6.5 per cent at stores that have been open for at least a year, including stores in Mexico, Canada and China. Comparable store sales at the almost 2,000 US stores were down 8.4 per cent.

”The housing and home improvement markets remained difficult in the first quarter; in fact, conditions worsened in many areas of the country,” said Frank Blake, chairman and chief executive.

”In addition, our decision to close stores and remove planned stores from our pipeline demonstrates our commitment to disciplined capital allocation.”

Mr Blake told analysts that Home Depot saw some worsening of demand in parts of the country during the quarter.

“In areas that have been hit hard in the past, such as Florida and California . . . it is hard to see a lot of improvement there. We’ve got other areas that had been relatively strong that have declined a bit,” he said, adding that demand in the southwest and parts of the Midwest remained comparatively strong.

Mr Blake said the retailer was holding or gaining marketshare in about half of its key product categories, which he regarded as an improvement, as it continues an effort to improve store performance that declined under his predecessor Bob Nardelli.

He also said the retailer was pleased with a drive to create some 3,000 positions for “master trade specialists” in the stores, while warning that it was not a programme that would deliver immediate measurable returns.

Home Depot said earlier this month it would slow its annual growth, in terms of square feet of store space to 1.5 per cent, adding 20 to 30 new US stores a year. That is less than a third of its pace of expansion last year.

On Monday, Home Depot’s smaller rival Lowe’s reported a lower quarterly profit and cut its earnings outlook for the year.

Shares in Home Depot were down over 3 per cent in morning trading at $27.98.