Home Depot (HD) Earnings: Short of a Home Run, but a Solid Hit

Some good news in the retail sector today as Home Depot beat earnings estimates by a penny and updated guidance. The company reported $0.72 per diluted share but was a bit short on revenue, which rose a lower-than-expected 1.7 percent over last year’s second quarter. Undaunted, the company raised fiscal guidance to about a 2.6 percent increase in sales for the year and a 22 percent increase in earnings to $1.90.

“We delivered solid results as we continue to build momentum with our merchandising transformation, supply chain enhancements and customer service initiatives,” said Frank Blake, chairman & CEO.

The company reported $0.66 per share for second quarter 2009.

Home Depot (NYSE: HD)

Comments: A reduction in depreciation/amortization expense substantially contributed to HD’s operating income in its 2010 statements. (Depreciation/amortization is a non-cash expense and can be adjusted as needed.) Still gross margins improved as did earnings, just not as much as the EPS figure implies if you remove the depreciation factor from the financial statements.  A 3.5 percent increase in average weekly sales totals shows that sales are improving despite discounting and higher cost of sales. Merchandise inventories increased this quarter, and it looks like the company is betting on seasonal sales to carry it through the end of the year.

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