The Home Depot Inc., the world’s largest home improvement store chain, reported Tuesday a 28 percent drop in fourth-quarter profit despite a modest 4 percent gain in overall sales. However, sales at stores open at least a year fell in the quarter.
Home Depot cited in part a slowing home improvement market amid a continued slump in the housing sector.
The results were in line with Wall Street expectations, when expenses related to severance payouts to former Chief Executive Bob Nardelli and four other executives who left the company in the final fiscal quarter of 2006 are excluded.
Nardelli’s replacement, Frank Blake, promised investors during a conference call Tuesday that the company would rededicate itself to improving the helpfulness and knowledge of its employees, bettering the shopping environment at its stores, enhancing its products and catering more to professional customers.
“These are straightforward priorities and a reasonable question would be, ’Haven’t you always been working on these?”’ Blake said.
He insisted it would be different under his watch, though he did not provide specifics on how Home Depot would meet the priorities he laid out. He said details would be provided at the company’s annual investor conference on Feb. 28.
The Atlanta-based company said it earned $925 million, or 46 cents a share, for the three months ending Jan. 28, compared to a profit of $1.29 billion, or 60 cents a share, for the same period a year ago.
Excluding 4 cents per share of expense related to executive severance, the company reported earnings of 50 cents a share. Analysts surveyed by Thomson Financial were expecting earnings of 50 cents a share, excluding one-time items.
Revenue in the quarter rose to $20.27 billion, compared to revenue of $19.49 billion recorded in the same period a year ago.
Same-store sales declined 6.6 percent in the fourth quarter, Home Depot said. Same-store sales, or sales at stores open at least a year, are a key retail performance measure. Total sales in its retail segment declined 2 percent in the quarter, though sales in its HD Supply unit, which it is considering shedding, grew more than 64 percent in the quarter, reflecting sales from acquired businesses. Home Depot said its average sales ticket in its retail segment fell to $56.27 in the fourth quarter from $57.20 in the same period a year earlier.
Blake said some people might question why Home Depot would consider selling HD Supply, which caters to contractors, homebuilders and other business customers, when the unit is doing so well.
“We are past, present and future a retail business,” Blake said. He added, “If we can create more shareholder value now through a sale or otherwise, then that’s what we will do.”
For all of fiscal 2006, Home Depot said it earned $5.76 billion, or $2.79 a share, compared to a profit of $5.84 billion, or $2.72 a share, for the same period a year ago. Twelve-month revenue rose to $90.84 billion, compared to $81.51 billion recorded for all of the previous year.
Nardelli resigned in early January after six years at the helm of the company, amid a furor over his hefty pay and Home Depot’s lagging stock price. He was replaced by Blake, who was the vice chairman of the company’s board. Nardelli received a severance package valued at about $210 million, according to the company.
At the end of the fourth quarter, Home Depot operated 2,147 stores in the United States, Canada, Mexico and China.
Home Depot lost market share in several key product categories in the fourth quarter, according to Blake. There was softness in big ticket items such as special order kitchens and flooring, while there was improvement in sales of appliances, said Craig Menear, Home Depot’s senior vice president of merchandising.
