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Housing, Sandy lift Home Depot's profits

By Associated Press

POSTED:



NEW YORK » Home Depot Inc.'s net income rose slightly in the third quarter as glimmers of a housing market recovery and storm preparation added to sales and offset costs related to closing stores in China.

Results beat expectations, and the company also raised its forecast for the year. Shares rose nearly 4 percent.

Home improvement companies have long been under pressure because of the weak housing market, as consumers cut back on large-scale renovation projects. But they stand ready to benefit as evidence mounts that the housing market is slowly improving.

Superstorm Sandy also spurred sales, but executives were cautious about forecasting how much they thought they would benefit from the storm because of the extensive damage and slow recovery.

"Our customers are still very much in turmoil," said CFO Carol Tome.

Sandy devastated the East Coast at the end of October, shortly after the quarter ended. Its damage was still being dealt with, as evidenced by one question from an analyst.

"Can you get more generators in your store in Vauxhall, N.J.?" Credit Suisse analyst Gary Balter asked semiseriously.

In the last week of the third quarter, the company garnered a $70 million lift from sales of batteries and flashlights, generators and extension cords.

Ultimately the company said it expects Sandy will generate about as much revenue as last year's Hurricane Irene, which garnered $360 million in sales off $16 billion in hurricane damage. Sandy has caused $20 billion in damage, so sales could be greater.

The slowly improving housing market was another focus for the quarter. Data are mounting that the housing market is slowly improving, with U.S. home prices and new-home sales pace increasing, although they remain well below peak levels.

Home Depot's CEO Frank Blake said that contributed to quarterly results.

"Our third-quarter results were better than we expected and reflected, in part, what we believe is the start of the path toward the healing of the housing market," he said in a statement.

Customer transactions over $900, about 20 percent of sales, rose 4.3 percent during the quarter, driven by purchases of appliances, flooring and kitchens.

Blake's statement signaled a "stronger tone" on the housing market than in prior quarters, said NBG Productions analyst Brian S. Sozzi, who called the remarks encouraging.

It remains to be seen whether Home Depot's smaller rival Lowe's Cos. will echo the sentiment when it reports results Monday.

For the period ended Oct. 28, Home Depot Inc. reported net income of $947 million, or 63 cents per share. That's up from $934 billion, or 60 cents per share, a year earlier.

Excluding a charge for closing some stores in China, earnings were 74 cents per share.






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