Home Depot Warns of Earnings Decline
ATLANTA (AP) July 10, 2007 — Home Depot, the world's largest home
improvement store chain, warned Tuesday that its earnings will decline this
year more than previously expected because of weak conditions in the housing
market and the sale of its wholesale distribution business.
The company said it now expects its earnings
per share to decline 15% to 18% for fiscal 2007. In May, the company had
projected an earnings per share decline of 9% for the year.
The earlier guidance included an estimated 18
cents of earnings a share contribution from the company's HD Supply unit for the
last six months of the fiscal year.
Last month, Home Depot said it was selling the
unit to a group of private equity firms for $10.3 billion. Home Depot said
Tuesday it is updating its guidance to reflect the unit as a discontinued
operation.
The company said it expects total retail sales
to be down 1% to 2% for the year and sales at stores open at least a year to be
down in the mid-single digit range.
The fiscal 2007 earnings per share targets
reflect 52 weeks and do not include the effect of the 53rd week. The company
will have 53 weeks of operating results in its fiscal 2007 financial results.
Home Depot projects that the 53rd week will add approximately 3 cents to its
consolidated earnings per share guidance for fiscal 2007.
The company said its updated earnings per share
guidance does not include the gain on the sale of HD Supply.
"While we expect the housing market to remain
challenging for the rest of 2007 and into 2008, we plan to continue our
reinvestment plans for the long-term health of our business, understanding that
it will put short-term pressure on earnings," Chief Financial Officer Carol Tome
said in a statement.
She added, "We are confident that over the long
term, we will deliver productivity improvements and enhance returns on invested
capital as the investments take hold."
Also Tuesday, Home Depot said it was launching
a tender offer for 250 million shares of its common stock at a price range of
$39 to $44 per share. The tender offer is scheduled to expire on Aug. 16.
Last month, the company announced a stock
repurchase program in which its board had authorized the company to buy back up
to $22.5 billion of Home Depot stock. The tender offer is part of that plan.
Home Depot, which has more than 2,000 stores in
the United States, Canada, Mexico and China, said Tuesday it will open
approximately 108 new stores in fiscal 2007.
