Home Depot 2Q Net Up 17%, Service Sector Grows 28%
Atlanta, GA, August 16--Home Depot reported second quarter net earnings of $1.8 billion, $0.82 per diluted share, up 17.1 percent.
Analysts surveyed by Thomson Financial were expecting earnings of $0.79 a share
Sales for the period increased $2.3 billion, or 11.7 percent to $22.3 billion. Comparable store sales growth was 4.0 percent.
"This quarter we demonstrated our strategy of enhancing our core through various initiatives aimed at improving store efficiency and customer service while executing on expanding our business through The Home Depot Supply to build strong, sustainable platforms for growth," said Bob Nardelli, chairman, president & CEO.
"In the second quarter we continued our focus on improving operating efficiencies and drove the highest operating margin in our company's history," said Carol Tome, executive vice president and CFO. At the end of the second quarter, the company reported total assets of $42.7 billion, total stockholders' equity of $25.1 billion and return on invested capital of 23 percent.
The company affirmed its fiscal 2005 sales growth guidance of 9-12 percent and increased its earnings per share growth guidance from 10-14 percent to 14-17 percent.
The company continues to invest in its stores to improve store efficiency and the overall customer shopping experience. In 2004, the focus was on enhancing the front-end of the store through self-checkout and a new point of sales system. For 2005, the company's focus is to enhance the receiving process. Back-end automated receiving (BEAR) is in over 1,000 stores and will be in all U.S. and Canadian stores by the end of the third quarter. Among other things, this initiative improves operational execution and productivity, enabling the company to reallocate resources to the selling floor.
Through The Home Depot's approach of adding new, innovative and distinctive merchandise, the company achieved a record second quarter average ticket of $57.54, an increase of 5.1 percent over the prior year.
During the second quarter, the company opened 44 net new stores, including the acquisition of seven Contractors' Warehouse stores in California. As of today, the total store count is 1,940.
The company's services business grew 28 percent during the second quarter of fiscal 2005. The Home Depot saw strong growth in categories such as roofing, countertops, kitchens, windows and soft flooring. In the second quarter, the company expanded it services platform through the acquisition of Viplex Industries, Inc., a leading company in the window and siding installation market in California.
Over the past four years, the company has expanded its market through The Home Depot Supply. "The acquisitions completed or announced during the second quarter solidify our leadership position by combining exceptional management teams with superior business models and specialized services," said Joe DeAngelo, president, The Home Depot Supply. "We see tremendous potential to continue expanding these businesses while providing unparalleled service to the professional contractor."
During the second quarter, The Home Depot Supply reported strong double-digit sales growth and represents approximately 4% of the company's total sales. The Home Depot Supply operates on three platforms: Maintenance, Repair and Operations (MRO), Builder and Professional Supply. A schedule outlining The Home Depot businesses within these platforms may be found on www.homedepot.com under the Investor Relations section.
The company operates 1,940 stores, which included 1,881 Home Depot stores with 1,711 stores in the United States, 123 stores in Canada, and 47 stores in Mexico. The company also operates 34 EXPO Design Centers, 11 The Home Depot Landscape Supply stores, two The Home Depot Floor Stores, five The Home Depot Supply stores and seven Contractors' Warehouse stores.
