Housing market helps Home Depot

  • Article by: ANDRIA CHENG , MarketWatch
  • Updated: November 13, 2012 - 8:08 PM

The home improvement retailer raised its forecast as strengthening market means more big-ticket sales.

NEW YORK - Providing a positive signal for the housing market, the world's largest home-improvement retailer, Home Depot Inc., reported a better-than-expected fiscal third-quarter profit Tuesday and raised its outlook for the year.

Among its upbeat indicators, the company cited continued improvement in Florida and California, both of which were among the states hardest hit by the housing downturn, as well as increased sales to professional contract customers, another key barometer of housing-market demand.

"We believe the U.S. is still working through the issues associated with the housing crisis," Chief Executive Frank Blake said during a Tuesday conference call, adding that national numbers also show housing has regained its status as a positive contributor to U.S. economic growth.

"Credit availability remains a major issue, but we can start to see the housing market as an assist to our growth rather than an anchor," he said. "We are starting to see the recovery of the housing market. The harder-hit areas that were really the epicenter of the housing crisis appear to be on the mend, and it's been constructive, and it's been consistent."

Thirty-three of the company's top 40 markets posted positive same-store sales. Its Northeastern region was the main one in which some markets saw negative sales.

While the company continued to see demand for maintenance and repair projects, a positive sign also emerged in sales of higher-priced items. The number of customer transactions rose 1.7 percent, while the average transaction amount rose 2.9 percent to $54.55, marking a sixth straight quarter of transaction and ticket growth.

While customer transactions -- or "tickets" -- under $50, representing approximately 20 percent of Home Depot's U.S. sales, were flat, transactions over $900, also about one-fifth of U.S. sales, were up 4.3 percent, driven by demand for appliances, flooring and in-stock kitchens.

Analysts have said a recovery in bigger-ticket items offers a view into consumers' willingness to shell out beyond basic repair needs. Blake said the company's windows business, hard hit during the economic downturn, also has seen a return to growth.

"Customers are beginning to be willing to step in and do the decor projects," Blake said on the call.

Home Depot, which saw demand rise as consumers readied for Hurricane Sandy, said recovery and rebuilding efforts will positively impact its sales -- to an extent comparable to the aftermath of last year's Hurricane Irene, with possible upside because of the bigger property damage estimated to have resulted from Sandy. The Home Depot executives, however, are uncertain about the timing of that impact.

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