Weights from Philadelphia

Home Depot Lowers 2007 Expectations

AP Online July 10, 2007 ATLANTA – The Home Depot Inc., the world’s largest home improvement store chain, on Tuesday cited continued weakness in the housing market and the sale of its wholesale distribution business as it issued a bleaker-than-expected financial outlook for the year.

But the Atlanta-based company also said it was launching a tender offer for 250 million shares of its common stock at a price range of $39 to $44 per share as part of a larger program to buy back up to $22.5 billion of its stock. see here home depot promotion code

Home Depot shares rose 26 cents to $40.49 in afternoon trading.

“We want to do better, we want to go faster,” Chief Financial Officer Carol Tome said in an interview. “But we are making progress. I think the public, as they shop in our stores, will see that.” Home Depot said it now expects its earnings per share to decline by 15 percent to 18 percent for fiscal 2007. In May, the company had projected an earnings per share decline of 9 percent for the year.

The earlier guidance included an estimated 18 cents of earnings per share contribution from the company’s HD Supply unit for the last six months of the fiscal year.

Last month, Home Depot said it was selling the unit to a group of private equity firms for $10.3 billion. Home Depot said Tuesday it was updating its guidance to reflect the unit as a discontinued operation.

Market factors are also hurting Home Depot, the company said in its announcement Tuesday.

The company said it now expects total retail sales to be down 1 percent to 2 percent for the year and sales at stores open at least a year to be down in the mid-single digit range.

“We look at the overall market and say there’s still correction that lies ahead of us,” Chief Executive Frank Blake, referring to the housing market, told investors hours after Home Depot gave the lowered guidance. “But again, we’re pretty far along in the correction process.” At the same time, Blake said Home Depot sees “continued headwinds through 2007 and probably some into 2008 as well.” That concern was underscored Tuesday by an announcement by Fort Worth, Texas-based D.R. Horton Inc. that the homebuilder will post a loss for the spring quarter after net orders fell 40 percent and the value of unsold houses is written down.

A glut of unsold new homes has pushed prices lower. Builders have responded by canceling options on land where they had planned to build.

The market aside, Blake said Home Depot still faces operational challenges. He noted Home Depot has been underperforming compared to others in its market. He said Home Depot is working to improve customer service, in part by giving employees financial incentives for doing good work.

Home Depot’s revised fiscal 2007 earnings per share targets reflect 52 weeks and do not include the impact of the 53rd week. The company will have 53 weeks of operating results in its fiscal 2007 financial results. Home Depot projects that the 53rd week will add approximately 3 cents to its consolidated earnings per share guidance for fiscal 2007.

The company said its updated earnings per share guidance does not include the gain on the sale of HD Supply.

Meanwhile, the tender offer launched Tuesday is scheduled to expire on Aug. 16.

Last month, the company announced a stock repurchase program in which its board had authorized the company to buy back up to $22.5 billion of Home Depot stock. The tender offer is part of that plan. At the midpoint of the tender offer’s price range, the 250 million shares represent less than half of the value of the total stock repurchase authorization. Home Depot has said it wants to complete the stock buyback plan as quickly as possible. Tome said Tuesday that Home Depot is using a “phased approach” to its stock repurchase program. homedepotpromotioncodenow.com home depot promotion code

Under terms of the tender offer, shareholders are given an opportunity to specify prices, within the stated price range, at which they are willing to tender shares. Upon receipt of the tenders, Home Depot will select a final price that enables it to purchase up to the stated amount of shares from those shareholders who agreed to sell at or below the company-selected price. There is no guarantee that shares tendered will be purchased. Home Depot said it may purchase up to an additional 39.5 million shares in the tender offer without extending the tender offer.

Goldman Sachs analyst Matthew Fassler said in a research note that Home Depot’s guidance cut is “modest in the grand scheme” of things, and he said Home Depot’s tender offer is positive news.

Home Depot, which has more than 2,000 stores in the United States, Canada, Mexico and China, said Tuesday it will open approximately 108 new stores in fiscal 2007. That’s down from the 115 stores it previously said it would open this year. Tome attributed the lower number to the logistics of opening new stores, not a change in strategy.

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