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Home Depot reported second-quarter financial results, showing net earnings fell 14.5 percent to $1.59 billion from $1.86 billion a year ago. Sales fell slightly, down 1.8 percent to $22.2 billion from $22.6 billion last year.
CEO Frank Blake said the company performed in line with financial expectations, despite a challenging housing market and competitive selling environment. In a statement, Blake expressed some pessimism on selling conditions in the coming year but added the company is attempting to find valuable investment opportunities to drive growth in a down market.
“We believe the housing and home improvement markets will remain soft into 2008. We will continue to invest thoughtfully for the long-term health of the business,” Blake said.
The year-over-year quarterly decline in sales was the first since a 2 percent drop in the period ending Feb. 2, 2003—the fourth quarter of fiscal 2002. That performance was affected by what then CEO Bob Nardelli described as “the current geopolitical environment” that preceded the beginning of the Iraq War.
|Q2 Net income|
|Down 14.5 percent|
|Down 1.8 percent|
Earnings in the company’s HD Supply unit, which the company has agreed to sell to a group of private investors, were lower in light of a hefty tax charge. Earnings fell 59 percent to $66 million from $161 million last year at HD Supply, including a tax charge of $60 million related to the disposition of the division. Home Depot now is listing HD Supply as a discontinued operation.
The company had previously announced it is renegotiating the sale of HD Supply to investor groups Bain Capital Partners, Carlyle Group and Clayton, Dubilier & Rice. The negotiations could result in a lower sale figure than the earlier agreed-upon $10.3 billion. The company also modified its plan to buy back 250 million shares for between $39 and $44, amending the figure to between $37 and $42 per share in light of current financial market conditions.
“The company is in discussions with respect to the restructuring of the sale of HD Supply and is carefully watching today’s turbulent financial markets,” said a statement from Home Depot. “The company will continue to assess financial market conditions and the impact of any restructured HD Supply transaction, or failure to complete that transaction, on its overall recapitalization plan and on the terms of the tender offer part of that plan.”
At the end of the second quarter, Home Depot operated about 2,200 retail stores, including 1,923 in the United States, 157 stores in Canada, 63 stores in Mexico and 12 stores in China.