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Nov 14, 2017

Home Depot's post-Hurricane boom comes at the expense of profit

Home Depot revenue rises on hurricane repairs

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Home Depot Inc. (HD.N) saw sales surge in the wake of this year’s barrage of hurricanes, but the storms still took a toll on the retailer’s bottom line.

Even as cleanup and rebuilding efforts helped the chain’s sales top analysts’ estimates, expenses related to the storms reduced operating profit by $51 million. The materials that people buy in the wake of natural disasters also tend to be less profitable, according to GlobalData Retail analyst Neil Saunders.

“Although natural disasters have had a positive impact on sales, their effect on margins has been less satisfactory,” Saunders said in a note.

The shares declined as much as 1.2 per cent in premarket trading. They had been up 23 per cent this year through Monday’s close.



The good news is Home Depot continued to benefit from the rebound in housing prices, which spurs owners to spend more on fixing up their properties. Last quarter, values in 92 per cent of U.S. metro areas rose.

Revenue climbed 8.1 per cent to US$25 billion, compared with analysts’ average estimate of US$24.5 billion. Profit rose to US$1.84 a share, exceeding the average US$1.82 projection. That marked the 14th straight quarter Home Depot has surpassed projections.

Sales at stores open for more than a year -- a key benchmark for investors -- rose 7.9 per cent, more than two percentage points above estimates, according to Consensus Metrix.

The company lifted its guidance for the full year, saying sales will be up about 6.3 per cent. That’s a full percentage point above previous projections. Profit will be about $7.36 a share, above the previous forecast of $7.29 a share, Home Depot said.

Home Depot said the hurricanes lifted same-store sales by about US$282 million in the quarter.

As one of the bright spots among major U.S. retailers, Home Depot has been dealing with high expectations. In August, the company reported second-quarter sales and profit that exceeded projections and also raised its annual forecast on both measures.