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Home Depot Warns of Earnings Decline

Posted on: Tuesday, 10 July 2007, 09:00 CDT

By HARRY R. WEBER

ATLANTA - The Home Depot Inc., 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 Atlanta-based company said it now expects its earnings per share to decline by 15 percent to 18 percent for fiscal 2007. In May, the company had projected an earnings per share decline of 9 percent for the year.

The earlier guidance included an estimated 18 cents of earnings per share contribution from the company's HD Supply unit for the last six months of the fiscal year.

Home Depot shares fell 24 cents to $39.99 in pre-market activity Tuesday.

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 was updating its guidance to reflect the unit as a discontinued operation.

The company said it expects total retail sales to be down 1 percent to 2 percent 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 impact 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. Home Depot shares have been trading recently at around $40 a share.

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. At the midpoint of the tender offer's price range, the 250 million shares represent less than half of the value of the total stock repurchase authorization. Home Depot has said it wants to complete the stock buyback plan as quickly as possible.

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.

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On the Net:

The Home Depot Inc.: http://www.homedepot.com

Source: Associated Press/AP Online

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