The Home Depot, Inc. (NYSE:
HD) is scheduled to release its Q1 2010 results after the market closes on May 17, 2010. Management is very confident regarding the fruits of their ongoing cultural, systems, supply chain, and operational transformation. However, there remains wood to chop, as the three biggest months of the year are April, May, and June.
Home Depot is the one of world''s largest home improvement retailer. The company offers a level of service unprecedented among warehouse-style retailers. Home Depot stores cater to do-it-yourselfers, as well as home improvement, construction and building maintenance professionals. The Home Depot currently operates in the USA, Canada, Chile, Puerto Rico, and Argentina. The company also operates EXPO Design Centers across the U.S. and Villager's Hardware in New Jersey.
As for the Q4 of 2009, sales reached $14.6 billion, a 0.3 % decrease from the Q4 of fiscal 2008. Total company comparable store sales for Q4 grew 1.2 %. Comparable store sales for U.S. stores were negative 1.1 %. Earnings per diluted share from continuing operations for Q4 were $0.18, compared to earnings per diluted share from continuing operations of $0.00 in the Q4 of fiscal 2008. Q4 2009 earnings per diluted share from continuing operations reflect a $163 million pre-tax write-down of the Company's investment in HD Supply. Excluding the write-down of the Company's investment in HD Supply, earnings from continuing operations were $402 million for the Q4 of fiscal 2009, an increase of 22.9% from adjusted earnings from continuing operations of $327 million in the Q4 of fiscal 2008. On an adjusted basis, earnings per diluted share from continuing operations were $0.24 for the Q4 of fiscal 2009, an increase of 26.3% from the same period in 2008. Q4 consolidated net earnings were $342 million, or $0.20 per diluted share, compared with a net loss of $54 million, or a $0.03 loss per diluted share, for the same period in fiscal 2008. Consolidated net earnings include $41 million of earnings from discontinued operations arising from the Company's working capital settlement agreement with HD Supply.
Analysts' estimates for Q1 2010 range from a low of $0.43 to a high of $0.49, compared to a consensus estimate of $0.46, with number of estimates being 17 and the co-efficient variance 3.29. HD is targeting 120 bps of total gross margin lift through 2012 from its supply chain and merchandising systems transformation. An EPS forecast of $0.42 for this quarter reflects an expectation for higher sales combined with incremental leverage and further gross margin improvement. We expect ticket to be slightly positive in 1Q and then accelerate into the back half of the year. The initial rebound/baseline of ticket growth is being driven by deferred maintenance and replacement demand (e.g., decor updates, appliances, paint, etc - see our December note "Answering the Ticket Question"). However, there are other encouraging ticket signs, not only in the broader retail environment (e.g., furniture), but in HD's business with categories such as patio furniture doing well. The path ahead to drive sales and margins through company-specific efforts is clear and remains long (i.e., beyond 2011). On the ramp of the business in the recovery, the management is cautiously optimistic that a solid base has formed and the trajectory is encouraging.
The stock closed at $35.49, up 5.56% on May 10, 2010 and most analysts' rate the stock as a relative Overweight with an average price target of $36.00.
