Home Depot First-Quarter Profit Falls 30% on Housing Slowdown (Bloomberg)

By Mark Clothier

May 15 (Bloomberg) -- Home Depot Inc., the world's largest home-improvement retailer, said first-quarter profit fell more than analysts' estimates after a slump in U.S. home sales lowered demand for kitchen cabinets and discouraged remodeling.

First-quarter net income fell 30 percent to $1.05 billion, or 53 cents a share, from $1.48 billion, or 70 cents, a year earlier. Sales rose 0.6 percent to $21.6 billion, the smallest gain in about four years, Home Depot said today in a statement.

Sales at the company's retail stores declined 4.3 percent. Chief Executive Officer Frank Blake, who took over in January after Robert Nardelli was ousted over compensation, tried to boost store sales by adding staff and hiring skilled trades people at about $30 an hour.

``There is not a heck of a lot of upside at this point,'' said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich. The firm holds $9.6 billion in assets including Home Depot shares. ``I don't expect sentiment to change until we see the whites of the uptick's eyes. That's going to take a while.''

Home Depot shares rose 15 cents to $39.01 in New York Stock Exchange composite trading yesterday. The stock declined 2.9 percent between Blake's appointment Jan. 3 and yesterday.

Analysts surveyed by Bloomberg estimated profit of 59 cents a share on sales of $21.8 billion.

Unit Sale

Home Depot is considering selling its HD Supply unit, which caters to professional builders, after expanding it with 34 acquisitions since 2004. Some investors said the expansion of the division, which makes up about 13 percent of sales, took Home Depot's focus off its retail stores.

Home Depot sales have grown an average of 12 percent the past three years, trailing 18 percent growth at Lowe's Cos., the second-biggest home-improvement retailer.

``We remain concerned with prospects for Home Depot and Lowe's,'' Brian Nagel, an analyst at UBS Securities LLC, wrote in a research note May 9. ``Continued weakness in the U.S. housing market is apt to have a more pronounced impact upon sales and earnings per share at the chains.''

Nagel, who has a ``reduce'' rating on the company, is the only analyst who recommends selling Home Depot stock. Twelve have it at ``buy,'' and nine say ``hold.''