The results included a nonrecurring charge of $543 million due to the close of 15 stores and the removal of 50 planned stores from the pipeline. Without that charge, net earnings were $697 million.
First-quarter sales for the locally based home improvement retailer dropped 3.4% to $17.9 billion, and comp store sales were down 6.5%. The company noted that the first quarter of the previous year encompassed a 14th week, which did not occur in this opening quarter.
The average purchase price in stores fell to $57.36, a 2.8% drop from the prior-year quarter, the company reported in a conference call. Customer transactions were down 1.3%.
The housing and home improvement markets were the chief culprits, according to Frank Blake, chairman and CEO, who also said that during the first quarter "conditions worsened in many areas of the country." The decision to close stores and cut planned openings "demonstrates our commitment to disciplined capital allocation," he added during a conference call.
During the call with analysts, Blake said the negative sales growth occurred in all categories but garden. "Plumbing, while negative, outperformed other categories," he added.
Big-ticket items, electrical, millwork and kitchens continued double-digit declines. "Regionally, where home prices fell approximately 15%," the company saw double-digit negative comps, he said, citing California and Florida. Even garden, which had positive comps for the company, experienced negative comps in San Jose.
He pointed to strength in basic repair categories and said the company will focus on that area of products. It has also adopted a strategy of focusing on improved customer service.
According to a published report, Home Depot Inc. and Citigroup Inc. tightened lending standards and raised interest rates for some users of their co-branded credit card. Late payments and defaults were cited as the reason.
Shares of HD common stock on the NYSE closed on the day of the call, Tuesday, May 20, at $27.37 a share, down 5.2% for the day, one in which the Dow also suffered significant losses. This compares with a 52-week high of $41.19 a share on June 20, 2007 and a 52-week low of $23.77 on this Jan. 9.
At the end of first quarter, the company operated 2,258 retail stores. They included 1,970 Home Depot units in the US and its territories, 166 in Canada, 69 in Mexico, 12 in China and two THD Design Center units, five Yardbirds stores and 34 Expos Design Center locations.
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