Home Depot earnings fall in the third quarter
Faced with a “tough environment” in the third quarter ended Oct. 28, Atlanta-based Home Depot saw earnings and sales decline on a weak housing market, with comparable-store sales declining 6.2 percent.
Earnings at the nation’s largest home channel retailer fell 27 percent to $1.09 billion from $1.49 billion in the same period last year. Sales were down 3.5 percent to $18.96 billion from $19.65 billion in last year’s third quarter.
In a statement, CEO and chairman Frank Blake highlighted the difficulties faced by the retailer in a volatile credit and home-building market.
“We are facing a tough environment as housing indicators continue to deteriorate. Our financial performance in the third quarter reflects these tough conditions,” Blake said. “But we are making significant improvements in our business, and we will continue to invest thoughtfully for the long-term health of the company.”
The company anticipates an 11 percent earnings-per-share decline for the rest of the year, with continued softness in the housing market at least through the end of the fiscal year. Still, the company expects to add about 5 cents to its per-share earnings outlook, due to a 53-week operating schedule this year compared with a 52-week cycle last year.
During the third quarter, Home Depot completed the sale of its HD Supply unit to a group of investment firms. HD Supply now is listed as a discontinued operation — the unit brought in earnings of $20 million in the third quarter.
Additionally, the company called into question the fate of a $22.5 billion recapitalization plan, of which $10.7 billion has been completed.
“Due to the volatility in the credit markets as well as the challenging housing and home improvement markets, the company believes it is prudent to take a cautious stance regarding the completion of the recapitalization until a more positive environment develops,” Home Depot said in a statement.
At the end of the quarter, the Atlanta-based retailer operated 2,224 retail stores in the United States, Canada, Mexico and China.
U.S. Concrete sales flat in the third quarter
Houston-based ready mix concrete company U.S. Concrete saw a relatively flat quarter for sales, with earnings growth hurt in part by adverse weather and a difficult housing market.
Earnings fell 10.5 percent to $10.04 million from $11.22 million in last year’s third quarter. Sales essentially were flat at $250.3 million compared with $250.6 million in the same period last year.
“This decline reflects the continued downturn in residential home construction activity in many of our markets, together with the impact of adverse weather conditions early in the quarter in our Texas markets,” the company said in a statement.
President and CEO Michael Harlan said although the company has been challenged by negative trends in residential construction, U.S. Concrete was able to charge higher prices for its product: the average sales price per cubic yard of ready-mixed concrete increased 5.5 percent in the third quarter compared with last year.
“However, we are seeing early signs of pricing pressure in select markets from our competition,” Harlan said. “Given these market conditions and an expectation for a decline in volumes in 2008, we are aggressively evaluating our cost structure and asset base. We have already begun to take action in several markets to bring our cost structure in line with our volume outlook and will continue to make adjustments throughout our business units over the coming months.”
U.S. Concrete serves professional and construction markets, with products including ready-mixed concrete, concrete-related products and precast products.
Restoration Hardware will go private
Specialty home decor and home furnishings retailer Restoration Hardware has been sold to private equity firm Catterton Partners for $267 million, in a move that will take the retailer private.
Restoration Hardware has seen several quarters of weakness due to an ultra-competitive home decor and furnishings environment. Strong competition from similar retailers, including Pottery Barn, Williams-Sonoma Home, West Elm, Pier 1 and Design Within Reach, combined with a downturn in the housing sector, led to losses in the company’s most recent fiscal quarter.
“We are excited about the opportunity to work with Catterton Partners, which has a successful track record and significant experience in the consumer and retail industries,” said Gary Friedman, Restoration Hardware chairman, president and CEO, in a statement. “We believe this partnership will provide us with important resources to execute our operating and growth strategies over the long term.”
J. Michael Chu, managing partner of Catterton Partners, said, “By combining our respective expertise, we believe we can continue to evolve and grow the brand and become a dynamic force in the marketplace.”
Under the terms of the agreement, in which Restoration Hardware will merge with a subsidiary of Catterton Partners, all of the company’s outstanding shares will be acquired for a price-per-share of $6.70.
The agreement still is subject to the approval of shareholders, as well as regulatory approval, but is expected to close in the first quarter of 2008.
In August, Restoration Hardware announced it would cut 100 jobs at the company’s Corte Madera, Calif.-based headquarters in order to save $9 million annually. In its second quarter, the company swung to a $5.5 million loss from $2.2 million in earnings last year.
Sales rose 2.2 percent to $183.8 million compared with $179.3 million last year.
Restoration Hardware has approximately 100 retail stores and eight outlet stores in 30 states, Washington, D.C., and Canada.