Home Depot posted fourth-quarter profit that topped analysts’ estimates, marking six straight years of meeting or exceeding projections, as the U.S. housing rebound spurs spending on renovations.
Net income in the three months ended Feb. 2 fell 0.8 percent to $1.01 billion, or 73 cents a share, from $1.02 billion, or 68 cents, a year earlier, the Atlanta-based company said Tuesday in a statement. The average of 25 analysts’ estimates compiled by Bloomberg was 71 cents. The chain has topped quarterly projections 23 times since mid-2008, while matching estimates once.
The largest U.S. home-improvement retailer has benefited as two years of rising housing prices prompted spending on remodeling kitchens and bathrooms. That demand helped Home Depot more than double its initial forecast for a 2 percent increase in 2013 sales, with revenue increasing 5.4 percent to $78.8 billion last year.
“The housing market is in the early innings of a recovery,” Robin Diedrich, an analyst with Edward Jones &Co. in Des Peres, Mo., said in an interview before the results were released. As long as Home Depot continues to increase sales, its profit margins will keep improving because it has done a good job lowering costs in the past few years, said Diedrich, who recommends holding Home Depot shares.
The company also raised its quarterly dividend 21 percent to 47 cents a share.
The shares gained 19 percent in the 12 months through Monday. That compares with a 25 percent advance for Lowe’s Cos. and a 22 percent increase for the Standard &Poor’s 500 Index.
The decline in fourth-quarter earnings was attributable to an extra week that boosted profit by 7 cents a share a year earlier. If that week were removed, sales gained 3.9 percent to $17.7 billion, the company said.
Home Depot said today that sales in the current fiscal year will increase 4.8 percent, compared with a December forecast of about 5 percent. The retailer also reiterated that operating margin would expand by 0.7 percentage points, spending on share repurchases will total about $5 billion and earnings per share will gain about 17 percent.
Chief Executive Officer Frank Blake has embarked on a growth strategy that relies on boosting sales within existing stores and online rather than opening new locations. The chain has “effectively saturated” markets in the U.S. and Canada and doesn’t plan to expand into new countries because it can get a better return by investing in current locations, Blake said at an investor conference in December.
To drive home the point, Blake said that in the third quarter Home Depot boosted revenue at existing U.S. locations by about $2 billion, which would take years to match in an overseas expansion. The company generates about 89 percent of its sales in the U.S.
“A wildly successful venture into a foreign country might yield $2 billion in sales after a decade of effort,” Blake said Dec. 11. “Opportunity and capital efficiencies strongly argue for intense focus here.”
In stores, Home Depot has pushed employees to spend more time helping shoppers, especially during peak periods, by reducing tasks such as stocking shelves. The chain said it should soon reach its goal of having store workers use 60 percent of their day on customers, which would be an increase from 40 percent in 2007.
On the Web, the chain is trying to better connect with its more than 2,200 stores. In 2013, it began shipping online orders to stores and this year plans to ship online orders from stores to homes. Home Depot also is adding three fulfillment centers in the U.S. to improve delivery times of web orders.
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