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Home Depot takes a hit in the fourth quarter

Home Depot, the world’s largest home channel retailer, saw earnings fall 27.5 percent in the fourth quarter to $671 million from $925 million last year. Sales were up 1.5 percent to $17.66 billion from $17.4 billion last year. The fourth quarter consisted of an additional week as well -- 14 weeks compared with 13 weeks last year.

Comparable-store sales took a hit on a rough-and-tumble housing market, conditions that also affected Lowe’s, which announced its fourth-quarter financial statement yesterday. Comparable-store sales were down 8.3 percent at Home Depot stores compared with last year’s fourth quarter. For the full year, comparable-store sales fell by a narrower margin of 6.7 percent.

For the full year, Home Depot recorded earnings of $4.4 billion, down 23.7 percent from $5.76 billion last year. Sales for 2007 were $77.35 billion, down 2 percent from $79 billion in 2006. Those figures don't include sales from the company's HD Supply unit, sold last year, which was listed on this most recent financial statement as a discontinued operation.

Commenting on the challenging marketplace, Home Depot CEO Frank Blake said, "This was a difficult year financially, but I believe the progress we made on our key priorities set the foundation for the long-term health of our company."

Blake added that 2008 looks to continue to be a challenging year -- the company is predicting a sales decline of 4 percent to 5 percent and negative comparable-store sales “in the mid to high single digit range.”

In the company’s fourth-quarter conference call with investors, Blake said the downturn still presented opportunities to reorder priorities and identify areas of particular weakness.

“I also think we’ll look back on it as one of the most important years for the overall health of the business,” Blake told investors.

Craig Menear, executive vp-merchandising for Home Depot, said several categories reflected softness in the market in the fourth quarter, with flat to negative sales growth compared with last year. The only department that saw positive sales growth, said Menear, was seasonal merchandise, specifically holiday sales. Other areas that outperformed the norm were plumbing, paint and hardware, he said.

Weak categories included special order kitchens and windows, which both saw double-digit sales declines. Big ticket items and construction categories continued to show weakness, Menear said, with January being “particularly soft.”

In 2008, Menear said the retailer is eyeing key areas of expansion where he said Home Depot has lost market share -- namely lighting, kitchens, bath fixtures and hand tools.

At the end of the fourth quarter, Home Depot operated a total of 2,234 retail stores in the United States, Mexico, Canada and China.


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