Tuesday, August 14, 2007
What’s up with Home Depot’s latest results?
Home Depot’s second-quarter results are just the latest indication of the weakness of the U.S. home improvement industry. The U.S. housing market — and consumer confidence — continue to slump, and the effects are being reflected in Home Depot’s numbers. (Home Depot isn’t the only one being affected, of course. Lowe’s has just revealed it will lay off more than 200 at its distribution centre in Central Florida.)
At Home Depot, sales for the second quarter reached $22.2 billion, a 1.8% decline from the same quarter a year earlier. Same-store sales were down (by 5.2%), but other factors such as a continued drop in LBM prices further affected Home Depot’s results.
The results were impacted most by the discontinuation of the HD Supply business. Not only will the giant retailer no longer benefit from the tremendous growth afforded it by this burgeoning division, but it had to take a $60 million tax charge in the latest quarter on the pending sale of this wholesale supply division.
One of Frank Blake’s first orders of business after taking over the helm of Home Depot this year (from Bob Nardelli – ‘nuff said there!) was to look for a buyer for HD Supply — despite the profitability of this division. While Home Depot’s fortunes increased by single digits in the first half of the decade, HD Supply was growing by as much as 35%, in both Canada and the U.S. In the company’s first quarter, HD Supply's revenue jumped 46% to $3.11 billion.
Blake wanted to sell it off simply to assuage Wall St. and Bay St., which have enough trouble understanding retail stocks to start with. Complicating things further by adding a wholesale division was never well received by the Street. Nevertheless, Blake must be lauded for staying the course and wants to put all the company’s efforts into rebuilding its core retail business.
In the meantime, though, Home Depot’s already troubled results will have to navigate heavy weather for a while longer. Let’s hope a turnaround occurs in the U.S. before creeping back to Canada and affecting the economy here too adversely.
— Michael McLarney
Publisher, Hardlines
At Home Depot, sales for the second quarter reached $22.2 billion, a 1.8% decline from the same quarter a year earlier. Same-store sales were down (by 5.2%), but other factors such as a continued drop in LBM prices further affected Home Depot’s results.
The results were impacted most by the discontinuation of the HD Supply business. Not only will the giant retailer no longer benefit from the tremendous growth afforded it by this burgeoning division, but it had to take a $60 million tax charge in the latest quarter on the pending sale of this wholesale supply division.
One of Frank Blake’s first orders of business after taking over the helm of Home Depot this year (from Bob Nardelli – ‘nuff said there!) was to look for a buyer for HD Supply — despite the profitability of this division. While Home Depot’s fortunes increased by single digits in the first half of the decade, HD Supply was growing by as much as 35%, in both Canada and the U.S. In the company’s first quarter, HD Supply's revenue jumped 46% to $3.11 billion.
Blake wanted to sell it off simply to assuage Wall St. and Bay St., which have enough trouble understanding retail stocks to start with. Complicating things further by adding a wholesale division was never well received by the Street. Nevertheless, Blake must be lauded for staying the course and wants to put all the company’s efforts into rebuilding its core retail business.
In the meantime, though, Home Depot’s already troubled results will have to navigate heavy weather for a while longer. Let’s hope a turnaround occurs in the U.S. before creeping back to Canada and affecting the economy here too adversely.
— Michael McLarney
Publisher, Hardlines
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