Shares of the Atlanta-based chain are down more than 32 percent over the past year as investors worried that consumers worried about losing their jobs would delay or scale back their home improvement projects. Considering that people's homes are usually their most valuable asset, that is a pretty scary idea. Nonetheless, investors took some solace from Home Depot's dismal results.
Home Depot reported a net loss of $54 million, or 3 cents per share, compared with earnings of $671 million, or 40 cents, for the same period in 2007. These results reflect a pre-tax charge of $387 million, a pre-tax write-down of the company's investment in HD Supply of $163 million, as well as a loss from discontinued operations of $52 million, net of tax. Sales fell 17.3 percent to $14.6 billion.
Excluding one-time costs, profit was 19 cents, four cents above the 15-cent average estimate of analysts surveyed by Bloomberg. Analysts expected revenue of $14.7 billion.
"Despite the difficult economic conditions, the Company made important progress in key areas," said Home Depot Chief Executive Frank Blake in a press release,. "We improved customer service ratings, as measured by customer surveys and third parties. We maintained sound inventory control, reducing inventory by over $1 billion while achieving the best in-stock rate we have had for several years."
Part of the reason for Blake's optimism is that the company is slashing costs. Last month, it announced plans to lay off 7,000 workers by shutterring its Expo unit. Blake is trying to unwind a strategy begun by his predecessor Robert Nardelli, who now runs Chrysler LLC.
Total sales are expected to decline by about nine percent with comparable same store sales declining in the high single digits, according to Home Depot's guidance. EPS from continuing operations are expected to fall by about seven percent.
One potential bright spot is that Home Depot's fortunes may improve if people decide to invest their economic stimulus money in their homes.
