Last updated: August 17, 2010 8:21 pm

Home Depot sales rise in US stores

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Home Depot, the largest US home improvement retailer, yesterday reduced its sales growth forecast for the full year, saying an expected increase in demand from professional contractors had failed to materialise amid continued weakness in the housing market.

The retailer, which operates almost 2,000 superstores across the US, cut its forecast for full-year sales growth to 2.6 per cent, from 3.5 per cent. But it left its earnings guidance essentially unchanged, saying it was continuing to see improvements in operating performance and was gaining market share.

Lowe’s, its smaller and habitually more optimistic rival, on Monday stuck to its full-year sales outlook, saying it hoped a slow second quarter would be offset by increased demand as the economy recovers.

But Frank Blake, Home Depot’s chief executive, said that despite the uncertain economic climate “we are seeing our business return to sales growth, and the hardest-hit parts of the country start to stabilise, so we will continue to invest and position our business for recovery”.

The retailer reported that sales at its US stores rose 1 per cent on a comparable basis against the same period last year, its second consecutive increase in quarterly comparable sales after four years of falling sales.

However, it saw continued weakness in high-value orders of $900 – one-fifth of its business – which were down 4.9 per cent against the quarter a year ago.

Customers continued to focus spending on items such as plumbing and roofing repairs, or small flooring or bathroom improvements, rather than large discretionary projects.

Craig Menear, head of merchandising, said the retailer was expecting to benefit in the second half of the year from customers spending on restoring lawns and grass after the hot summer. But overall, he said “we think that they will continue to focus on the maintenance and repair and simple updates around their homes”.

Home Depot cut its forecast for full-year sales growth to 2.6 per cent from 3.5 per cent previously. But it raised its full-year earnings forecast by 2 cents to $1.90.

Mr Blake noted that the retailer’s efforts to predict demand were becoming increasingly difficult because of volatility in the macroeconomic data, such as housing sales or housing repair investment, that it might traditionally have used.

Like many US retailers, Home Depot has stopped opening new stores since the start of the recession and focused on improving the return of its existing network, through initiatives including establishing new regional distribution centres and efforts to improve store service.

Home Depot’s shares, which rose above $35 after its first-quarter results in May, increased more than 4 per cent to $28.70.

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