Home Depot profit tops estimates; outlook raised

(Reuters) - Home Depot Inc raised its fiscal-year earnings outlook on Tuesday as tight cost controls helped the world's largest home improvement chain to offset sales weakness and beat Wall Street's profit estimates in the latest quarter.

The company's second quarter, which ended on July 29, is typically the most important selling period for home improvement chains, but unseasonably warm weather early in the year pulled some demand into the first quarter.

Net earnings rose to $1.53 billion, or $1.01 a share, in the quarter from $1.36 billion, or 86 cents a share, a year earlier.

Analysts on average were expecting a profit of 97 cents a share, according to Thomson Reuters I/B/E/S.

Sales rose 1.7 percent to $20.57 billion, but missed the analysts' average estimate of $20.74 billion. Operating expenses fell 2.7 percent to $4.46 billion.

Shares of Home Depot rose 1.3 percent to $53.50 in trading before the market opened.

Home Depot has benefited from its recent efforts to improve distribution and customer service. It has been quicker to cut costs than rival Lowe's Cos Inc, and in some cases has gotten a boost as housing markets have rebounded in regions where it has a heavy presence.

A return to more localized marketing and merchandising has also helped Home Depot.

In the second quarter, sales at stores open at least a year rose 2.1 percent globally, including a 2.6 percent increase in the United States.

While Home Depot's results exceeded his estimates, Janney Capital Markets analyst David Strasser said he was less optimistic about same-store sales growth in the back half of the year, citing consumer spending trends.

The company's operating performance remains impressive, but that is largely priced into the stock, Strasser said.

Barclays analyst Alan Rifkin said he still believed Home Depot was "most attractively positioned at this stage of the housing recovery." He reiterated his ratings of "overweight" on the company and "equal weight" on Lowe's.

Home Depot said it still expected total fiscal-year sales to rise 4.6 percent. It forecast earnings at $2.95 a share, up from its prior outlook of $2.90.

The company, which has stores in the United States, Canada, Mexico and China, reported a 0.6 percent rise in the number of customer transactions in the second quarter, and their average value increased 1.8 percent to $55.02.

In the past year, Home Depot has shifted its focus to cheaper products such as faucets and paint to draw more shoppers.

Responding to the weak economy, consumers are still spending on affordable merchandise, but staying away from pricey items like cabinets, some suppliers to Home Depot and Lowe's have said.

(Reporting by Dhanya Skariachan in New York; Editing by Lisa Von Ahn)

Source: http://news.yahoo.com/home-depot-profit-tops-estimates-despite-sales-miss-101643192--finance.html

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