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Aug 14, 2018

Home Depot bounces back from rare slowdown with strong quarter

Home Depot Beats on 2Q Sales, Increases Annual Forecast


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Home Depot Inc. offered more evidence that the U.S. housing market is still humming along, reporting second-quarter sales that impressed investors.

The home-improvement chain said same-store sales increased 8 per cent in the three months ended July 29, topping the projected 6.5 per cent increase compiled by Consensus Metrix. That was welcome news for investors after results disappointed in the previous quarter, with a longer winter pushing off outdoor renovations. The shares rose 1.8 per cent in early trading.

Home Depot and its smaller rival Lowe’s Cos. are often seen as proxies for the health of the housing sector because property owners spend more on their homes when they believe values are rising. But for several quarters there’s been increasing concern that years of robust home-price gains are cooling. For its part, Home Depot has continually said that a shortage of available homes in many markets would actually underpin higher home-improvement spending.

When Home Depot reported that its first-quarter results were hurt by prolonged cold temperatures and snow, it added that property owners had embraced big projects as the weather warmed up in May.

“Not only did our seasonal business rebound from the first quarter, but our overall results exceeded our expectations," Chief Executive Officer Craig Menear said in a statement Tuesday.

The company increased its annual forecast, with this year’s revenue seen gaining 7 per cent and earnings at US$9.42 a share. It had previously projected a sales gain of 6.7 per cent and profit of US$9.31 a share.

Earnings in the first quarter amounted to US$3.05 a share, Atlanta-based Home Depot said. Analysts had estimated US$2.84.

There were plenty of mixed signals within housing data during the second quarter. While price gains slowed from earlier in the year, they still rose 5.3 per cent, according to the National Association of Realtors. Prices also climbed in 161 of 178 metropolitan areas measured.

More homeowners also put properties on the market in June, reversing three years of annual inventory declines, the association said. That could create a glut of properties, which would be a drag on prices. But it could also mean more first-time homeowners and lots of potential new customers for Home Depot.