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.

 www.online.wsj.com 

Home Depot Catches Up on Internet Sales

Every once in a while there is an interesting article on Home Depot or Lowe’s that deserves your attention or is quite interesting.  This is one of those stories.

NEW YORK — August 14 -- At Home Depot lnc.’s about 2,000 U.S. stores, signs point shoppers to look online for more options, buy anytime at their convenience and get free shipping on Internet purchases of gas grills or lawn mowers.

As of this month, when shoppers find their local store on its website, they see new information including whether the store provides key cutting or tool rental. They also see the store manager’s name, as well as the in-store layout. Item searches yield how many items are in stock at the nearest stores.

“We know we were behind folks like Amazon.com,” said Hal Lawton, Home Depot’s president of online. “We’ve put a stake in the ground. We want to catch up and then get ahead. We certainly are not going to lose share.”

Like other retailers, the world’s largest home-improvement retailer says it’s expanding in the online channel aggressively and targeting it as a major growth opportunity.

Home Depot has made its biggest e-commerce investment over the past two years since it started Internet sales in 2001. An important part of the company’s $370 million in planned annual IT spending over the next three to four years will be online, including mobile, the company said, declining to elaborate.

Its own research shows 40% of all home-improvement projects begin online. So far this year, 45% of the 9.5 million consumers who visited the Home Depot website on average in any given week said their next step was a trip to a Home Depot store, which translates to about 225 customers a day per location.

Catching up

Initiatives this year include continuing its first major website makeover in 10 years. It also wants to let Web orders be picked up in stores by Labor Day, a service already touted by retailers from Wal-Mart Stores Inc.  to rival Lowe’s Cos.

On the mobile front, Home Depot introduced apps for Windows and Android platforms and also updated the one for the iPhone.

What’s more, it’s digitizing its special-order catalogs — an area Home Depot says has the potential to generate additional $1 billion in sales if it can match the competition’s share of the special order market.

As of this month, when shoppers find their local store on its website, they see new information including whether the store provides key cutting or tool rental. They also see the store manager’s name, as well as the in-store layout. Item searches yield how many items are in stock at the nearest stores.

“We know we were behind folks like Amazon.com,” said Hal Lawton, Home Depot’s (NYSE:HD) president of online. “We’ve put a stake in the ground. We want to catch up and then get ahead. We certainly are not going to lose share.”

Beyond generating additional sales, the company also wants to use the Internet as a marketing medium to help build customer loyalty and feed store sales. To encourage store employees to sell things online, about three years ago Home Depot began to credit e-commerce sales and profits to individual stores, instead of counting them as separate.

While Wall Street analysts have lauded the changes, they said Home Depot still has a lot of work to do. Competition is getting more fierce with online retailers such as Amazon.com Inc. (NASDAQ:AMZN) encroaching upon its turf by selling things like ladders.

“Consumers start their research online,” said BMO Capital Markets analyst Wayne Hood. “It’s important for them to engage the consumers in that effort. But … if the core business doesn’t improve, the Internet isn’t going to move the needle for them.”

For instance, Hood added the company could move to regional pricing instead of having standard pricing nationally both online and in stores.

The online channel represents a small percentage of about $70 billion in estimated sales for the Atlanta-based company. Lawton said the company won’t start to disclose the channel’s size until it crosses the $1 billion mark. (At smaller rival Lowe’s, e-commerce accounted for less than 1% of fiscal 2010 sales.)

Nevertheless, industry-wide online sales this year are forecast to rise 12% to $197 billion, according to Forrester Research. That represents 9% of the total U.S. retail market, with the percentage expected to increase to 11% of the total in 2015, Forrester says.

E-commerce for the home-improvement sector “is an underleveraged opportunity,” said Craig Johnson of consultancy Customer Growth Partners. “A lot of people think of Home Depot as a place you go on a Saturday, or when you do window treatment or carpeting. They can do a better job online for things like branded power tools and replenishable items. Why not get them delivered on a regular basis?”

The company is adding 3,000 to 5,000 units to its online offerings each week after having more than doubled the count to 210,000 in the past two years. Each store stocks an average of 30,000 units.

To bolster bigger-ticket spending, shoppers can now schedule appointments with kitchen designers online and communicate changes with them directly to shorten and simplify an order process that could previously take about 90 days and as many as 14 store visits, Lawton said.

Last October, it launched a how-to online forum, where 25 employees were given Flip video cameras and editing training to spend a dedicated portion of their time on project and buying guides and also answering customer questions.

“There are interesting opportunities that the Internet opens for us,” Chief Executive Frank Blake told MarketWatch. “It’s a way to extend our aisle. It’s an efficient way for us to communicate the [product] knowledge. It plays a lot of different roles.”