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The Home Depot Announces Third Quarter Results; Updates Fiscal Year 2009 Guidance

ATLANTA, Nov. 17 /PRNewswire-FirstCall/ -- The Home Depot®, the world's largest home improvement retailer, today reported third quarter of fiscal 2009 net earnings of $689 million, or $0.41 per diluted share, compared with net earnings of $756 million, or $0.45 per diluted share, in the same period in fiscal 2008.

 

Sales for the third quarter totaled $16.4 billion, an 8.0 percent decrease from the third quarter of fiscal 2008. Comparable store sales for the third quarter were negative 6.9 percent, and comp sales for U.S. stores were negative 7.1 percent.

"There is still a great deal of pressure in the housing and home improvement markets, though there are some positive signs of stabilization," said Frank Blake, chairman and CEO. "Our business continues to perform well in a difficult environment. We grew market share in the quarter, continued to transform our business and improved customer service. I want to thank our associates for their hard work and dedication."

Updated Fiscal 2009 Guidance

Based on its year-to-date performance, the Company continues to expect sales to be down approximately 9 percent for the year. The Company updated its fiscal 2009 EPS guidance and now expects diluted earnings per share from continuing operations of approximately $1.50, up 9.5 percent from fiscal 2008. On an adjusted basis, the Company now expects diluted earnings per share from continuing operations of approximately $1.55 for the year, a decline from fiscal 2008 of approximately 13 percent.

The Home Depot will conduct a conference call today at 9 a.m. ET to discuss information included in this news release and related matters. The conference call will be available in its entirety through a webcast and replay at homedepot.com in the Investor Relations section.

At the end of the third quarter, the Company operated a total of 2,242 retail stores, which included 1,975 The Home Depot stores in the United States (including the Commonwealth of Puerto Rico, the territory of the U.S. Virgin Islands and the territory of Guam), 179 stores in Canada, 77 stores in Mexico and 11 stores in China. The Company employs more than 300,000 associates. The Home Depot's stock is traded on the New York Stock Exchange (NYSE: HD) and is included in the Dow Jones industrial average and Standard & Poor's 500 index.

To provide clarity, internally and externally, about the Company's operating performance for the recently completed fiscal quarter, the Company supplemented its reporting with non-GAAP financial measures to reflect the impact of the store rationalization charge, business rationalization charges and related restructuring charges. The Company believes that these non-GAAP financial measures better enable management and investors to understand and analyze the Company's performance by providing them with meaningful information relevant to events of unusual nature or frequency. However, this supplemental information should not be considered in isolation or as a substitute for the related GAAP measures. A reconciliation of the non-GAAP financial measures to the corresponding GAAP measures can be found in the attached schedule.

Certain statements contained herein constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the demand for our products and services, net sales growth, comparable store sales, store openings and closures, state of the economy, state of the residential construction, housing and home improvement markets, state of the credit markets, including mortgages, home equity loans and consumer credit, commodity price inflation and deflation, implementation of store initiatives, continuation of reinvestment plans, net earnings performance, earnings per share, stock-based compensation expense, capital allocation and expenditures, liquidity, the effect of adopting certain accounting standards, return on invested capital, management of the Company's purchasing or customer credit policies, the effect of accounting charges, the planned recapitalization of the Company, timing of the completion of such recapitalization, the ability to issue debt on terms and at rates acceptable to us and financial outlook. Such forward-looking statements are based on currently available information and current assumptions, expectations and projections about future events. You are cautioned not to place undue reliance on our forward-looking statements. Such statements are not guarantees of future performance and are subject to future events, risks and uncertainties - many of which are beyond our control or are currently unknown to us - as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include but are not limited to those described in Item 1A, "Risk Factors," and elsewhere in our Annual Report on Form 10-K for our fiscal year ended February 1, 2009, and in Part II, Item 1A, "Risk Factors" and elsewhere in our Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2009.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update such statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the Securities and Exchange Commission.

                          THE HOME DEPOT, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF EARNINGS
                        FOR THE THREE MONTHS AND NINE MONTHS ENDED
                          NOVEMBER 1, 2009 AND NOVEMBER 2, 2008
                                        (Unaudited)
        (Amounts in Millions Except Per Share Data and as Otherwise Noted)


                       Three Months                  Nine Months
                          Ended       % Increase        Ended       % Increase
                   11-1-09   11-2-08  (Decrease)  11-1-09   11-2-08 (Decrease)

    NET SALES      $16,361   $17,784      (8.0)%  $51,607   $56,681     (9.0)%
    Cost of Sales   10,800    11,790      (8.4)    34,208    37,651     (9.1)
      GROSS PROFIT   5,561     5,994      (7.2)    17,399    19,030     (8.6)

    Operating
     Expenses:
       Selling,
        General
        and
        Administra-
        tive         3,870     4,225      (8.4)    12,033    13,595    (11.5)
       Depreciation
        and
        Amortiza-
         tion          428       446      (4.0)     1,290     1,342     (3.9)
          Total
           Operating
           Expenses  4,298     4,671      (8.0)    13,323    14,937    (10.8)

      OPERATING
       INCOME        1,263     1,323      (4.5)     4,076     4,093     (0.4)

    Interest (Income)
     Expense:
      Interest and
       Investment
       Income           (4)       (6)    (33.3)       (15)      (13)    15.4
      Interest
       Expense         168       157       7.0        515       485      6.2
         Interest, net 164       151       8.6        500       472      5.9

    EARNINGS BEFORE
     PROVISION FOR
     INCOME TAXES    1,099     1,172      (6.2)     3,576     3,621     (1.2)

    Provision for
     Income Taxes      410       416      (1.4)     1,257     1,307     (3.8)

      NET EARNINGS    $689      $756      (8.9)%   $2,319    $2,314      0.2%


    Weighted Average
     Common Shares   1,682     1,681       0.1%     1,684     1,681      0.2%

    BASIC EARNINGS
     PER SHARE       $0.41     $0.45      (8.9)     $1.38     $1.38        -

    Diluted Weighted
     Average Common
     Shares          1,693     1,687       0.4%     1,692     1,686      0.4%

    DILUTED EARNINGS
     PER SHARE       $0.41     $0.45      (8.9)     $1.37     $1.37        -




    SELECTED          Three Months                     Nine Months
     HIGHLIGHTS          Ended       % Increase          Ended      % Increase
                   11-1-09   11-2-08  (Decrease)  11-1-09  11-2-08  (Decrease)
    Number of
     Customer
     Transactions      314       315     (0.3)%      986       989     (0.3)%
    Average Ticket
     (actual)       $51.89    $55.86     (7.1)    $52.27    $56.97     (8.2)
    Weighted Average
     Weekly Sales
     per Operating
     Store (in
     thousands)       $558      $597     (6.5)      $586      $640     (8.4)
    Square Footage
     at End of Period  235       238     (1.3)       235       238     (1.3)
    Capital
     Expenditures     $215      $451    (52.3)      $568    $1,411    (59.7)
    Depreciation and
     Amortization (1) $453      $476     (4.8)%   $1,364    $1,432     (4.7)%


    (1)  Includes depreciation of distribution centers and tool rental
         equipment included in Cost of Sales and amortization of deferred
         financing costs included in Interest Expense.



                          THE HOME DEPOT, INC. AND SUBSIDIARIES
                               CONSOLIDATED BALANCE SHEETS
            AS OF NOVEMBER 1, 2009, NOVEMBER 2, 2008 AND FEBRUARY 1, 2009
                                  (Amounts in Millions)

                                            11-1-09      11-2-08      2-1-09
                                          (Unaudited)  (Unaudited)   (Audited)

     ASSETS
       Cash and Short-Term Investments        $2,725        $874        $525
       Receivables, net                        1,188       1,490         972
       Merchandise Inventories                10,817      11,869      10,673
       Other Current Assets                    1,169       1,374       1,192
          Total Current Assets                15,899      15,607      13,362

       Property and Equipment, net            25,581      26,782      26,234
       Goodwill                                1,163       1,175       1,134
       Other Assets                              407         598         434
          TOTAL ASSETS                       $43,050     $44,162     $41,164

     LIABILITIES AND STOCKHOLDERS' EQUITY
       Accounts Payable                       $5,829      $6,773      $4,822
       Accrued Salaries and Related Expenses   1,069       1,044       1,129
       Current Installments of Long-Term Debt  1,769       1,016       1,767
       Other Current Liabilities               3,788       4,048       3,435
          Total Current Liabilities           12,455      12,881      11,153

       Long-Term Debt                          8,656      10,353       9,667
       Other Long-Term Liabilities             2,559       2,532       2,567
          Total Liabilities                   23,670      25,766      23,387

       Total Stockholders' Equity             19,380      18,396      17,777
          TOTAL LIABILITIES AND STOCKHOLDERS'
           EQUITY                            $43,050     $44,162     $41,164





                        THE HOME DEPOT, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF EARNINGS ITEMS
                      EXCLUDING CERTAIN ADJUSTMENTS (NON-GAAP)
                     FOR THE THREE MONTHS AND NINE MONTHS ENDED
                       NOVEMBER 1, 2009 AND NOVEMBER 2, 2008
                                    (Unaudited)
                    (Amounts in Millions Except Per Share Data)


                    Three Months Ended 11-1-09    Nine Months Ended 11-1-09
                            Adjust-  As Adjusted          Adjust-  As Adjusted
                  Actuals   ments(1) (Non-GAAP) Actuals    ments(1) (Non-GAAP)

    Net Sales    $16,361       $-     $16,361   $51,607     $221   $51,386

    Gross Profit   5,561        -       5,561    17,399       28    17,371

    Total
     Operating
     Expenses      4,298        9       4,289    13,323      174    13,149

    Operating
     Income        1,263       (9)      1,272     4,076     (146)    4,222

    Net Earnings    $689      $(6)       $695    $2,319     $(90)   $2,409


    Diluted
     Earnings Per
     Share         $0.41       $-       $0.41     $1.37  $(0.05)     $1.42



                    Three Months Ended 11-2-08   Nine Months Ended 11-2-08
                           Adjust-  As Adjusted           Adjust-  As Adjusted
                  Actuals  ments(1) (Non-GAAP) Actuals    ments(1) (Non-GAAP)

    Net Sales    $17,784       $-     $17,784   $56,681       $-    $56,681

    Gross Profit   5,994        -       5,994    19,030      (10)    19,040

    Total
     Operating
     Expenses      4,671        3       4,668    14,937      554     14,383

    Operating
     Income        1,323       (3)      1,326     4,093     (564)     4,657

    Net Earnings    $756      $(4)       $760    $2,314    $(355)    $2,669

    Diluted
     Earnings Per
     Share         $0.45       $-       $0.45     $1.37   $(0.21)     $1.58


    (1) Adjustments are comprised of store rationalization charges related to
        the closing of 15 stores and the removal of 50 stores from our future
        growth pipeline, business rationalization charges related to the exit
        of EXPO, THD Design Center, Yardbirds and HD Bath businesses, as well
        as net sales, gross profit and operating expenses of those exited
        businesses during the period from closing announcement to actual
        closing, and charges related to restructuring of support functions.

SOURCE The Home Depot

Financial Community: Diane Dayhoff, Vice President of Investor Relations, +1-770-384-2666, diane_dayhoff@homedepot.com; News Media: Paula Drake, Sr. Manager, Corporate Communications, +1-770-384-3439, paula_drake@homedepot.com