Home Depot lowers earnings estimates

Harry R. Weber

Friday, Jan. 3, 2003 | 9:49 a.m.

ATLANTA -- Shares of Home Depot sank 12 percent today after the company lowered its earnings estimates for the fiscal year ending in February, citing sluggish holiday sales.

The country's largest home improvement store chain said late Thursday that it expected earnings of between $1.53 and $1.55 a share -- well below the $1.57 a share forecast by analysts surveyed by Thomson First Call.

The announcement came after the markets closed Thursday. In trading this morning on the New York Stock Exchange, Home Depot shares fell $2.98 to $21.90.

Although retailers have been warning for weeks now that holiday sales were not nearly as strong as hoped, the extent of Home Depot's losses were still striking. Home Depot said its overall sales declined up to 10 percent during December. The company had been expecting a drop of 3 to 5 percent.

For the year, Home Depot said it expects total sales growth of 10 percent and earnings per share growth of 21 to 23 percent on a comparable 52-week basis for fiscal 2002.

The company hesitated to say things would improve in 2003.

"These business trends indicate the likelihood of a challenging environment well into the next fiscal year," Chairman and Chief Executive Bob Nardelli said. "The Home Depot will focus on sales growth opportunities, including development of new products and assortments, as well as reinvestment in our stores, our associates and our systems, all with the goal of improving every customer's shopping experience."

The company will detail its plans in an investor conference Jan. 17.

Also Thursday, Home Depot said it is making progress in eliminating some products that come from environmentally sensitive areas. The company, the nation's largest wood retailer, has been under pressure from environmentalists to alter its timber policy.

Officials said they have reduced by 70 percent purchases of Indonesian lauan, a tropical hardwood grown in rainforests that is used in door components. It said it has also focused on buying redwood from two companies committed to promoting sustainable forests.

The company sells more than $5 billion of lumber, plywood, doors and windows a year. Of particular concern was the amount of wood it bought from cutters in Malaysia, Indonesia and Ecuador, which have seen their forests reduced by 11 percent in the past decade.

The Home Depot, which had 2002 sales of $53.6 billion, operates more than 1,500 stores in the United States, Canada and Mexico.