Home Depot guidance up: A sign of consumer spending?

The Home Depot (HD), by far the largest supplier of home improvement items at retail, said its financial results would be better than expected for the current fiscal year. That probably means homeowners are doing a little more spending than saving and contractors may be seeing a brightening of their prospects.

The company said that it is updating its FY2009 EPS guidance and now expects earnings per share from continuing operations to be flat to down 7 percent from last year. On an adjusted basis, the HD now expects earnings per share from continuing operations to decline by 20 percent to 26 percent.

The firm previously announced its expectation that earnings per share from continuing operations in FY2009 would be down 7 percent from last year, and down 26 percent on an adjusted basis.

Home Depot also said it was intensifying its focus on several initiatives including customer service. That may make people wonder why it was not a priority before. HD said it would also more carefully monitor asset allocation and its supply chain. It would seem that those matters should have been important all along.

Because Home Depot's sales were $72 billion last year, it is probably a good proxy for national spending on home improvement. If so, its new guidance is a positive economic indicator, one more sign that the recession is ending.

Douglas A. McIntyre is an editor at 24/7 Wall St.