Home Depot Gets A Weather Boost

May 15 -- Home Depot Inc.'s fiscal first-quarter earnings rose 27% as unseasonably warm weather in many regions across the country inspired customers to complete exterior projects and start spring-related tasks early.

One of the warmest U.S. winters on record particularly helped drive demand in the heavily populated Northeast U.S., though Home Depot also notched a stronger performance in the South and West where weather was more normal. The warmer weather helped encourage customers to tackle some outdoor projects, though some analysts have wondered how much of the retailer's strength of late is due to demand as a result of the strengthening economy or sales being pulled forward.

Craig Menear, Home Depot's merchandising chief, told analysts during a conference call Tuesday that sales of seasonal products including mowers, lawn accessories, and soils and mulches were strong in the latest quarter. Outdoor project items like decks, exterior stains, gutters and fencing also notched double-digit gains.

Chief Executive Frank Blake said when stripping out the favorable weather, Home Depot's results reflected growth in U.S. economic growth , rather than a recovery in the housing market, which he said remains under pressure. Pricing is stabilizing, he added, but not yet solid, and credit availability continued to be constrained.

Still, the nation's largest home-improvement retailer remains bullish and raised its fiscal-year targets. The company now sees earnings of $2.90 a share on a 4.6% jump in sales, up from the February view of $2.79 on roughly 4% sales growth.

Home Depot expects sales to rise this year as it sees firmer demand for repair and remodeling needs. The company is also hoping to see additional benefits from a website upgrade and new offerings, including in-store repair services for power equipment and power tools.

For the quarter ended April 29, Home Depot reported a profit of $1.04 billion, or 68 cents a share, up from a year-earlier profit of $812 million, or 50 cents a share. The most-recent quarter included a 3 cents a share gain from the termination of a senior secured loan. Sales increased 5.9% to $17.81 billion.

Same-store sales rose 5.8%, and climbed 6.1% domestically. Regionally, 38 of Home Depot's 40 top U.S. markets notched growth, and housing-challenged Florida and California continued to recover. The North division notched a double-digit jump in same-store sales, while increases in the South and West were more modest.

Gross margin edged up to 34.7% from 34.6%.

Home Depot's margins have been bolstered of late from the company's investment in its rapid-deployment centers, which has helped put more items in stock and lowered costs. The supply-chain investment has been widely touted by analysts, and helped Home Depot report better same-store sales than rival Lowe's Cos . for 11 consecutive quarters. Lowe' is due to report first-quarter results on Monday, and saw its shares dragged 0.8% lower, to $29.32 following Home Depot's report.

Home Depot said the supply-chain investments allowed it to react faster to demand fluctuations. Chief Financial Officer Carol Tome said in an interview that within that network stores can override orders at the last minute or move products from one market to another.

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