Home Depot 2Q Earnings Up 5.3%, Guidance at Low En

Atlanta, GA, August 15, 2006--Home Depot reported a 5.3 percent jump in second-quarter earnings on a strong rise in sales. However, it said its earnings growth for the year will be at the low end of its previous guidance. The company reported earnings of $1.86 billion, or $0.90 a share, for the quarter, compared with a profit of $1.77 billion, or $0.82 a share, for the same period a year ago. Excluding the tax charge, Home Depot reported earnings of $1.93 billion, or $0.93 a share. Analysts surveyed by Thomson Financial were expecting earnings of $0.92 a share in the second quarter. Revenue in the second quarter rose 16.7 percent to $26.03 billion, compared with $22.31 billion recorded a year ago. Total sales in the Retail segment grew 5.1 percent to $22.6 billion, reflecting new stores and comparable store sales of -0.2 percent. Total sales in the Supply segment grew by 325 percent to $3.5 billion, driven by recent acquisitions, including Hughes Supply, as well as double-digit organic growth. Bob Nardelli, chairman, president & CEO, said, "We are committed to providing the best possible shopping experience for our customers and, as a result, are accelerating investment in merchandising, in store appearance and in our associates." Accelerated retail investments to enhance the shopping experience include: * Increasing Associate Availability: 5.5 million hours in U.S. stores in the back half of the year * Rapid Refresh: a 100 bay reset to be completed by year-end in 540 stores * Big Hits: merchandising resets including hand tools, special order ceramic tile and appliance mezzanines in selected stores * Store Modernization: the completion of self-checkout in all stores; belted checkstands, customer service callboxes and enhanced store appearance in selected stores * Technology: the completion of the rollout of the Special Order Service Initiative to all flooring departments and the continued investment in Core Retail merchandising systems * Customer Service Hotline: the introduction of 1-800-Home Depot, an enhanced 24-hour customer service hotline In total, the cmpany is investing approximately $350 million incrementally in the back half of the year in support of these accelerated programs, demonstrating a significant commitment to its retail operations. In the second quarter, the company repurchased 58 million shares, including the shares repurchased under an accelerated share repurchase program. Since its share repurchase program began in 2002, the company has repurchased 349 million, or approximately 17 percent, of its outstanding shares and spent $12.5 billion under its $14 billion authorization. The company saw growth in average ticket across most merchandise categories. In the second quarter of fiscal 2006, The Home Depot increased its average ticket by 4.2 percent to $59.98. "Store modernization, product innovation and a compelling value proposition will continue to be our primary focus for the remainder of the year," said Tom Taylor, executive vice president, merchandising and marketing. "Our number one priority is to create the best shopping experience." Significant second quarter merchandising accomplishments included: * Increased market share in key categories on a 12-month rolling basis, according to an independent third party: * 10.1 percent market share in appliances, up 130 basis points * 24.4 percent market share in lawn power equipment, up 60 basis points * 17.5 percent market share in grills, up 190 basis points * Launched three new exclusive product lines: * Thomasville brand hardwood flooring, complementing the company's exclusive line of Thomasville cabinets * American Standard faucets featuring the Speed Connect drain system and EverClean(TM) glaze finish * RIDGID XLi 24-volt lithium-ion system, including a 24-volt hammer drill kit and 24-volt combo kit During the quarter, the company opened 30 new stores, including two relocations, with two new stores in Canada and one new store in Mexico, bringing the total store count to 2,079. As of the end of the quarter, approximately 10 percent of the company's store base was in Canada and Mexico, as compared to nine percent for the same period last year. As in the United States, the company continues to be the market leader in Canada and Mexico. During the quarter, HD Supply experienced 325 percent sales growth and accounted for approximately 13 percent of the company's consolidated sales. Home Depot made several acquisitions which will be integrated into the HD Supply family of businesses, providing professional customers with a continuum of products and services, from infrastructure through construction to lifetime maintenance: * Western Fasteners, a distributor of construction fasteners, power tools and accessories, which operates eight branches located in Colorado, Texas, New Mexico and Arizona * Texas Contractors Supply, a distributor of forming, concrete accessories, tilt-wall and power tools, which operates five distribution centers in Texas * Rice Planter Carpets, a provider of flooring design, sales and installation services to local, regional and national home builders through two locations in South Carolina * Forest Products Supply, a supplier of lumber, doors, architectural millwork and windows through two locations in Florida In January, the company stated it would grow its 2006 sales by 14-17 percent and its earnings per share by 10-14 percent. Based on the current economic environment and its reinvestment program, the company believes its fiscal 2006 sales and earnings per share growth will be at the low end of its guidance.