Home Depot Q3 earnings down 30.7 percent

Home Depot posted third-quarter net earnings of $756 million, a decline of 30.7 percent from the same period last year. Comp-store sales in the quarter for the world’s largest home improvement retailer declined 8.3 percent, as total sales dropped 6.2 percent to $17.8 billion.

"The housing and home improvement markets remain challenging,” said Frank Blake, chairman & CEO. “Across our entire business, we are making the adjustments necessary to respond to a tough market environment. We are carefully controlling our discretionary spending, scrutinizing every dollar in capital, and, most important, intensifying our focus on our customers.”

The company said it now believes that its fiscal 2008 sales could be down as much as 8 percent for the year.

Craig Menear, executive vp-merchandising, said Home Depot experienced negative comp-store sales in all categories except building materials, which was driven by strong sales in roofing and insulation -- although some of the dollar gains in roofing could be attributed to the increase in petroleum costs.

Other departments that outperformed the company average were plumbing, hardware and lawn and garden, while categories that underperformed the company average included kitchen and bath, millwork, electrical, lumber and flooring. Paint performed at the company’s average comp.

From a regional perspective, northern areas like the Northern Plains and Ohio Valley performed above the company average, while the southern states of Texas, Oklahoma and Louisiana saw an increase of $125 million in incremental sales largely attributable to Hurricanes Gustav and Ike.

In addition, average ticket was down $1.62, or 2.8 percent, from the same quarter last year to $55.86. The company saw a decline in big-ticket sales, with special order kitchens down 30 percent versus last year. Total company transactions were 315 million, down 3.4 percent year-over-year, although Menear said the company saw an improving trend during the last six weeks of the quarter.

“One of our ongoing initiatives has been to reduce promotions and refocus our efforts on being an everyday value provider as part of our portfolio strategy," Menear said. "Our marketing campaign supporting our new lower prices reinforces the everyday value message.”

In the United States, six of 13 departments gained unit share, with strong gains in several categories, including insulation, carpeting, toilets, power tools and molding -- the latter benefiting from the new regional approach to assortments and the addition of new POS that makes it “easier for the customer to shop,” Menear said.

Carol Tome, Home Depot’s chief financial officer, said the company anticipates a challenging sales environment in the fourth quarter, and she projects comps will be down about 8 percent for the year.