From CBS Marketwatch:
Home Depot said that its first-quarter net income dropped 33% to $1.0 billion, or 53 cents a share, from $1.5 billion, or 70 cents a share, a year ago. Sales at the home improvement retailer rose 0.6% to $21.6 billion. Analysts had been expecting the company to produce earnings of 59 cents a share and revenue of $21.83 billion, according to data complied by Thomson Financial. Home Depot said that a challenging housing market and erratic weather across the country hit its Spring selling season. It added that its review of strategic alternatives for its supply operations is ongoing. Home Depot said that the home improvement market is expected to remain soft in 2007 and, based on the first-quarter, it's now expecting earnings at the low end of its guidance range. At the beginning of 2007, the company said that it was expecting earnings per share to decline by between 4% and 9% in the year
From Bloomberg:
First-quarter net income fell 30 percent to $1.05 billion, or 53 cents a share, from $1.48 billion, or 70 cents, a year earlier. Sales rose 0.6 percent to $21.6 billion, the smallest gain in about four years, Home Depot said today in a statement.
Sales at the company's retail stores declined 4.3 percent. Chief Executive Officer Frank Blake, who took over in January after Robert Nardelli was ousted over compensation, tried to boost store sales by adding staff and hiring skilled trades people at about $30 an hour.
``There is not a heck of a lot of upside at this point,'' said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich. The firm holds $9.6 billion in assets including Home Depot shares. ``I don't expect sentiment to change until we see the whites of the uptick's eyes. That's going to take a while.''
Wal-Mart
Here's the money points from the WSJ article on Wal-Mart:
U.S. same-store sales rose 0.6%, below expectations for a 1% to 3% increase. Wal-Mart's namesake stores had a 0.1% decline in comparable-store sales, while Sam's Club had a 4.7% gain excluding changes in fuel prices. Before November, Wal-Mart stores had never seen a drop in same-store sales for a single month.
Due to a calendar shift that pushed some Easter sales into the March reporting period, April same-store sales fell 3.5% on a 4.6% drop at Wal-Mart stores. The companywide decline was the just the third since the retailer began reporting monthly sales data in 1979, and was by far the biggest. The other negative months were November, when same-store sales fell 0.1%, and April 1996, when an earlier Easter also skewed year-over-year comparisons and helped result in a 0.6% decline.
Here's what Bloomberg wrote:
Sales at older stores rose 0.6 percent, the smallest gain in at least 10 years, after fewer customers visited stores because of rising gasoline prices and stormy weather in the U.S. Chief Executive Officer H. Lee Scott promoted low prices for groceries and prescriptions after failing to lure consumers with more fashionable clothes and home goods.
Wal-Mart said first-quarter net income rose 8% to $2.83 billion, or 68 cents a share, with revenue up 8.5% to $86.41 billion. Analysts, on average, were expecting the Bentonville, Ark.-based retailer to earn 68 cents a share on revenue of $86.94 billion, according to Thomson Financial. Wal-Mart said the profit rise was driven by the group's Sam's Club and international operations. It's expecting U.S. comparable-store sales to rise between 1% and 2% after a 0.6% first-quarter rise, and second-quarter earnings from continuing operations to be between 75 cents and 79 cents. Analysts were expecting second-quarter earnings of 79 cents a share
Home Depot's basic problem is easy: it's sales are tied to the housing market. That's about all that needs to be said.
Wal-Mart is a bit more complicated. First, they are in the middle of trying to do different things. I have heard interviews with several analysts who are not enamored to current management for a variety of reasons. So, part of this problem is the result of getting away from core business.
However, April's drop was huge. While there are numerous explanations floating around, they don't deal explain the magnitude of April's drop. We had high gas prices last summer and Wal-Mart did fairly well -- or they didn't have a decline of April's magnitude. In addition, Bloomberg noted a drop in traffic. Traffic is the life blood of retailers. If people don't go to the store and browse, they can't buy. This explains why Wal-Mart's stores had a decline in sales.
Also of importance is this point: Sales at older stores rose 0.6 percent, the smallest gain in at least 10 years. That should raise a ton of eyebrows about the health of the US consumer.
