Atlanta - Home Depot posted third-quarter profit that topped analysts’ estimates, benefiting from the years-long increase in US home prices and Americans’ increasing reluctance to spend on shorter-lived goods.
Profit in the three months through November 1 was $1.36 a share, excluding some items, the Atlanta-based company said Tuesday in a statement. Analysts projected $1.32 a share.
While several parts of the retail industry have struggled this year as shoppers hold off on discretionary purchases like clothing, home-improvement has continued to shine. Home Depot has often said that increasing real estate values are the best predictor of Americans’ willingness to spend on their dwellings, and the run-up in housing prices is now approaching four years.
Revenue rose 6.4 percent to $21.8 billion last quarter, matching analysts’ average projection. Same-store sales advanced 5.1 percent, topping analysts’ estimate for a 4.6 percent gain. The figure is especially important to Home Depot because it has basically stopped opening new stores - once a key driver of its growth. Now the chain relies on boosting its online business and making existing locations more productive.
Profit forecast
Home Depot said Tuesday that profit this year will be $5.36 a share, at the top of its previously forecast range of $5.31 to $5.36. Analysts estimate $5.32, on average. Same-store sales for the year will rise 4.9 percent, also the top of its earlier projection.
The shares rose 2.5 percent to $123.90 at 6:21 a.m. in early trading in New York. Home Depot already had gained 15 percent this year through Monday.
Investors soured on US retailers last week after lackluster results from department-store chains like Macy’s Inc. and J.C. Penney Co. The Commerce Department only added to the malaise and raised more concern about how much shoppers will spend this holiday season after saying that sales at US retailers rose 0.1 percent during the third quarter, which trailed the median forecast of economists surveyed by Bloomberg.
While decreasing foot traffic at shopping centres has hurt mall-based retailers, Home Depot saw a 4.4 percent increase in the number of customer transactions during the third quarter. The average purchase size increased as well, gaining 0.8 percent to $58.03.
Home prices in 20 US cities rose at a faster pace in the year ended August, a sign the industry continues to strengthen on improving demand. The S&P/Case-Shiller index of property values climbed 5.1 percent from August 2014 after rising 4.9 percent in the year ended in July, the group said last month.
BLOOMBERG