Home Depot’s post-hurricane boom comes at expense of profit

By Matt Townsend, Bloomberg

Home Depot saw sales surge in the wake of this year’s barrage of hurricanes, but the storms still took a toll on the retailer’s bottom line.

Even as cleanup and rebuilding efforts helped the chain’s sales top analysts’ estimates, expenses related to the storms reduced operating profit by $51 million. Customers stocked up on less profitable plywood and generators during the natural disasters and that narrowed margins, the company said.

“Although natural disasters have had a positive impact on sales, their effect on margins has been less satisfactory,” said Neil Saunders, a GlobalData Retail analyst

The shares had been up 23 percent this year through Monday’s close. Shares were at $165.95 at 11:55 a.m.

The good news is Home Depot continued to benefit from the rebound in housing prices, which spurs owners to spend more on fixing up their properties. Last quarter, values in 92 percent of U.S. metro areas rose.

Revenue climbed 8.1 percent to $25 billion, compared with analysts’ average estimate of $24.5 billion. Profit rose to $1.84 a share, exceeding the average $1.82 projection. That marked the 14th straight quarter Home Depot has surpassed projections.

Sales at stores open for more than a year — a key benchmark for investors — rose 7.9 percent, more than two percentage points above estimates, according to Consensus Metrix.

Home Depot said the hurricanes lifted same-store sales by about $282 million in the quarter, and those gains are expected to surge in the final months of the year because that’s when homeowners will start receiving insurance checks for damage, the company said.

Related ArticlesNovember 14, 2017

Hurricane Harvey’s “Biblical” rainfall is getting more likely

November 14, 2017

Add this to your list of job demands: paid vacation for extreme weather

November 13, 2017

PHOTOS: Desperate search for survivors after earthquake on Iran-Iraq border

November 13, 2017

Over 400 dead from earthquake in Iran-Iraq border area

November 12, 2017

Powerful earthquake on Iran-Iraq border kills 207 people

The company lifted its guidance for the full year, saying sales will be up about 6.3 percent. That’s a full percentage point above previous projections. Profit will be about $7.36 a share, above the previous forecast of $7.29 a share, Home Depot said.

The company added it doesn’t expect a tax proposal from House Republicans — which would reduce the mortgage interest that homeowners can deduce — to have a material impact on results. The bill would lower the deduction cap for mortgages to $500,000 from $1 million. Only 22 percent of tax filers use the deduction and about 5 percent of mortgages are in excess of $500,000, the company said.

Provisions in the House and Senate tax bill won’t slow the U.S. housing market, according to Chief Financial Officer Carol Tome. Aggregate prices are still below where they …read more

Source:: The Denver Post – News


(Visited 3 times, 1 visits today)

Leave a Reply

Your email address will not be published. Required fields are marked *