Home Depot to Scale Back New Stores, Focus on Services
{{#rendered}} {{/rendered}}Retailer Home Depot Inc. (HD) on Thursday said it would scale back new-store openings over the next five years as it steps up growth in services and professional markets to drive sales and earnings.
The top home improvement retailer, at a meeting with analysts, also forecast per-share earnings for its current fiscal year below the average Wall Street estimate.
For fiscal 2005, which ends later this month, it forecast earnings of $2.64 to $2.67 per share, compared with an average forecast of $2.70 among analysts polled by Reuters Estimates.
{{#rendered}} {{/rendered}}The retailer said sales should top $81 billion, up from $73 billion in the prior year.
For fiscal 2006, it expects per-share profit growth of 10 percent to 14 percent, excluding its planned acquisition of construction materials supplier Hughes Supply Inc. (HUG). That translates to about $2.92 to $3.03 per share, based on the midpoint of its forecast range for 2005. Analysts' average forecast is $3.04.
Last week, Home Depot said it would buy Hughes for $3.2 billion, its largest acquisition to date, as it looks to fuel growth beyond its core retail business. Hughes distributes a broad range of products, from fire hydrants to heating and cooling systems, to municipalities and contractors.
{{#rendered}} {{/rendered}}The acquisition would more than double the size of the Home Depot Supply division, which caters to professionals such as builders and which currently accounts for 4 percent of company sales. By 2010, the retailer said it expects Home Depot Supply to account for 18 percent to 19 percent of overall sales.
Home Depot said it expects services, which includes installations of windows, roofing and other products for homeowners, to account for 5 percent to 6 percent of overall sales by 2010.
It also said Internet and catalog sales had the potential to be a billion-dollar business over the next five years.
{{#rendered}} {{/rendered}}Home Depot said it would open 400 to 500 stores over the next five years.
The Atlanta-based retailer has been ratcheting down its store openings since Robert Nardelli took over as chief executive in late 2000. For example, it opened 183 new stores in fiscal 2004, down from 204 in fiscal 2000, its financial reports show. The company's target for 2005 was 175.
Rival Lowe's Cos. Inc. (LOW) plans to open 150 to 160 new stores in both 2006 and 2007 as it expands to large U.S. cities.
{{#rendered}} {{/rendered}}Home Depot has more than 2,000 stores, compared with 1,175 for Lowe's.