Home Depot’s post-hurricane boom comes at expense of profit

By Matt Townsend, Bloomberg

Home Depot 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. Customers stocked up on less profitable plywood and generators during the natural disasters and that narrowed margins, the company said.

“Although natural disasters have had a positive impact on sales, their effect on margins has been less satisfactory,” said Neil Saunders, a GlobalData Retail analyst

The shares had been up 23 percent this year through Monday’s close. Shares were at $165.95 at 11:55 a.m.

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 percent of U.S. metro areas rose.

Revenue climbed 8.1 percent to $25 billion, compared with analysts’ average estimate of $24.5 billion. Profit rose to $1.84 a share, exceeding the average $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 percent, more than two percentage points above estimates, according to Consensus Metrix.

Home Depot said the hurricanes lifted same-store sales by about $282 million in the quarter, and those gains are expected to surge in the final months of the year because that’s when homeowners will start receiving insurance checks for damage, the company said.

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Source:: The Denver Post

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