Home Depot has a more customer focused approach in order create more loyal customers and to attract news customers. This increases Home Depots average ticket which increases the company's overall profitability.
The Expo stores, which were aimed at the high end home market, may well have been loosing money. This was likely happening even before the housing market dropped so low. In this economy, the best move any company can make is to reduce expenses and losses. The Home Depot can concentrate on it's core business....the world's largest chain of home improvement stores
Many have said that the housing market as bottomed out and the numbers in the August report show signs of it. Construction of single-family homes rose for the fifth straight month and the number of new building permits rose nearly 6%. New construction is up 37% from its low during the winter. Also, new home sales unexpectedly rose 9.6% in July. As the housing market starts to rebound from its prior collapse, companies like Home Depot and Lowe's that supply the material needed to build and furnish homes will start to show positive signs in sales and profits.
Homeowners will look to spend money in their current home to make it more like the new home they can no longer afford to purchase and they will also look at spending money low-cost, high-return DIY projects like landscaping and painting. Also, energy efficiency government programs encourage homeowners to update appliances etc.
Home Depot Inc. (HD) posted stronger-than-expected results. The hardware company posted a net loss of $54 million, or 3 cents a share, for the quarter ended February 1, compared with earnings of $671 million, or 40 cents a share, a year earlier. The latest results included a pretax charge of $387 million tied to the elimination of 7,000 jobs from the closure of the Expo Design Center chain and other corporate cuts. There was also a $163 million writedown of an investment. Excluding those items, profit from continuing operations was 19 cents a share, exceeding the analysts’ average forecast of 15 cents, according to Reuters Estimates.
Despite housing construction being at an a half-century low and foreclosures on the rise, HD still managed to post a 44% increase in Q1 profits for 2009 and beat what the market was expecting. These gains were pushed by seasonal sales of gardening materials such as fertilizers, seeds, and herbs. Maintenance products such as caulk, water heaters, plumbing supplies, and paint also sold well. HD is still growing even though one of its major segments is suffering. In addition, HD is also outperforming main competitor LOW as that company posted a decrease in profits for the first quarter of 2009.