Atlanta, GA, May 19--Home Depot Chairman and Chief Executive Bob Nardelli said he remains "encouraged" about the strength in the home-improvement sector.
"Interest in starting home-improvement projects is higher than last quarter and a year ago," said Nardelli, who is also president, during a conference call to discuss better-than-expected results in the first quarter.
In addition, consumers are expressing more interest in using professionals for installed sales, one of Home Depot's focus areas. Those and other indicators point to solid trends in Home Depot's businesses serving retail and professional customers, Nardelli said.
The nation's largest home-improvement chain generated 7.7% sales growth at comparable stores in the quarter, including increases of 8.8% in February, 6.1% in March and 8.1% in April, Chief Financial Officer Carol Tome said. "Our momentum continues as we have seen strong sales in the first two weeks of the second quarter," she said.
She said Home Depot is aware of much speculation about the impact of potentially rising rates on the Atlanta retailer's business. But the company recently updated its economic outlook and reviewed sales and interest rates over the last 10 years, she said.
"Our analysis shows no significantly statistical correlation between the two," she said.
Indeed, Home Depot raised its earnings and sales guidance in light of the healthy outlook for the home-improvement industry and the strength of Home Depot's business, she said. The company also reiterated plans to open 185 stores this year, including 20 it plans to acquire in Mexico.
Earlier Tuesday, Home Depot posted a 21% increase in net income for the quarter ended May 2 and boosted its full-year earnings outlook, saying it continues to build on momentum created last year by enhancing stores, extending its business and expanding its markets.
Net income rose $191 million to $1.1 billion, or 49 cents a share, from $907 million, or 39 cents a share, a year earlier. Sales rose $2.4 billion, or 16%, to $17.6 billion from $15.1 billion, and the company opened 33 stores, bringing its total chain to 1,740 stores.
Both sales and earnings topped analysts' forecasts.
Home Depot last week said it plans to double its size in Mexico by buying home-improvement retailer Home Mart Mexico for undisclosed terms. Some of Home Mart's 20 stores overlap sites around Mexico City that Home Depot had identified for new stores this year if the deal didn't go through, CEO Nardelli said. As a result, Home Depot moved 10 stores targeted for development this year into 2005. Only two or three of the stores moved into 2005 were planned for the U.S., he said.
Home Depot's same-store sales growth was the highest for the first quarter in five years, Nardelli said.
He credited efforts to modernize Home Depot's stores, add compelling merchandise, and make operational and technological improvements.
Home Depot posted same-store sales growth in 10 of 11 product categories, and its 7.4% increase in the average sales ticket included increases in every category, said John Costello, executive vice president of merchandising and marketing. The average sales ticket rose $3.82 to $55.11, setting a company record.
Home Depot didn't specify which product category generated a decline in same-store sales, but said its seasonal living business got off to a slower start than a year earlier due to weather. Still, Home Depot is encouraged by recent performance in such categories as outdoor power equipment and landscape supplies as warmer weather arrived, Costello said.
Strongly performing categories cited by Home Depot executives included appliances, kitchen cabinets and countertops, flooring, patio products and ceiling fans.
About 15% of Home Depot's stores are in markets where the company operates multiple stores, resulting in some cannibalization of sales, CFO Tome said. That overlap hurt comparable-store sales by 2.5 percentage points, she said.
