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.
Lowe’s sees earnings drop on rough housing market
Lowe’s saw earnings drop on a rough housing market, with comparable-store sales taking a hit — although the company’s CEO said he believes impending federal stimulus initiatives could help jumpstart sales in the coming months.
Earnings fell 33.4 percent to $408 million in the quarter, from $613 million last year. Sales were down 0.3 percent to $10.38 billion compared with $10.4 billion last year.
For the full year, earnings were down 9.5 percent to $2.81 billion compared with $3.1 billion last year. But for the year, sales rose 2.9 percent to $48.3 billion from $46.93 billion in 2006.
Comparable-store sales dropped 7.6 percent in the fourth quarter; while for the full year, comparable-store sales were down 5.1 percent from last year.
In a statement, Lowe’s president and CEO Robert Niblock said the fourth quarter fell short of the company’s financial plans, as “we faced an unprecedented decline in housing turnover, falling home prices in many areas and turbulent mortgage markets that impacted both sentiment related to home improvement purchases as well as consumers’ access to capital.”
Niblock went on to say the retailer expected further turbulence in 2008 and predicted sales would remain soft.
“We remain focused on what we can control,” he said, namely customer service initiatives and managing expenses. He also credited interest rate cuts and an impending economic stimulus initiative by the federal government for helping improve the home improvement retail outlook.
“As a result [of those initiatives] many of the headwinds facing the housing market and the home improvement industry should lessen, and consumers’ confidence in investing in and improving their homes should improve,” he predicted.
During the quarter, Lowe’s opened 72 new stores, including two relocations. As of Feb. 1, the retailer operated 1,534 stores in the United States and Canada.
Orgill focuses on expansion at show
Orlando The 2008 Orgill Spring Dealers’ Market, held last week in Orlando, Fla., included news the hardlines distributor was expanding, with a new distribution warehouse opened in Kilgore, Texas, and two more planned for the Pacific Northwest and Midwest, as earlier reported by Home Channel News.
The show also focused on expanding product lines, new dealers, vendor presence — on the show floor and also in the warehouse — and new products.
“We had, I think, 225 new dealer prospects, which is one of the gauges of an event like this for us,” explained Ron Beal, president and CEO of Orgill.
“We’ve got a good representation of dealers from all different parts of the ‘three-legged stool’ there (hardware stores, home centers and pro-dealers),” he added.
Beal said that in light of the tough housing market, he was pleasantly surprised by the show’s turnout.
Orgill also expanded some of its own product lines.
“We’ve redone a lot of our core areas, electrical plumbing, and really have some exciting things going on,” said Beal.
Beal also mentioned a new ‘green’ section that was prominent on the showroom floor. “This is the first time we’ve ever focused on it,” he said. Beal noted that ‘green’ is something Orgill has been hearing its members request more and more, and while the focus on green at the Orlando show wasn’t large, the company plans to expand on it.
“We’re really going to splash green at our Chicago show,” said Beal. “We’re aware of it. It’s real. We’re working on things, and we know it’s an opportunity.”