Home Depot earnings hammered!!!!!!!!

NEW YORK (CNNMoney.com) -- Home Depot posted a 66% drop in quarterly profit Tuesday, as it paid to close stores and cut back on expansion plans amid the housing slump, although the results topped analysts' forecasts.

The world's largest home improvement retailer said its net income fell to $356 million, or 21 cents per share, from $1.05 billion, or 53 cents per share, in the year-earlier period.

Excluding one-time expenses of $543 million involved in the closing of 15 stores, Home Depot (HD, Fortune 500) reported profit of $697 million, or 41 cents a share.

Analysts surveyed by Thomson Financial had been looking for earnings of 37 cents per share on that basis.

Sales fell 3.4% to $17.9 billion, but narrowly beat Wall Street's expectations for revenue of $17.6 billion.

"The housing and home improvement markets remained difficult in the first quarter; in fact, conditions worsened in many areas of the country," said Frank Blake, chairman and CEO, in a statement.

Home Depot not only announced plans to close 15 stores during the quarter, but also to remove 50 stores from the future growth pipeline.

Home Depot's sales were boosted by a calendar shift that favored seasonal benefits. The first quarter included the week from April 29 to May 4, which is a strong week in lawn and garden sales, adding $536 million to sales, according to Home Depot.

The calendar shift may have boosted the first quarter, but it "will negatively impact the second quarter. They will gain a week in August, which is not as profitable," said Mitchell A. Kaiser, senior research analyst at Piper Jaffray.

Consumers spending less on home improvements
The number of customer transactions decreased 1.3% in February, March and April from the year ago period.

As home prices slump across the country, fewer people are spending money to renovate their homes, and the improvements that they are making are not as expensive. The average amount that customers are spending decreased 2.8% in the first quarter.

"People are spending on small ticket types of repairs for their homes, not big ticket" renovations, said Wayne L. Hood, analyst for BMO Capital Markets.

Consumers are less likely to spend on expensive bathroom and kitchen renovations because the value of their home is decreasing, according to Kaiser. With gas and food prices increasing, Kaiser said that people have less extra income to spend on home improvements.

Same-store sales, a gauge of retail health that measures sales at stores open at least a year, decreased 6.5% during the quarter.

Home Depot has more stores in the Northeast than in other regions of the country, which may be one reason that the company was able to beat expectations, according to Hood.

"Everything we have heard is that the Northeast is doing better for all retailing, so that helped them," he said.

Lowe's (LOW, Fortune 500), the second largest home improvement store chain in the country, reported a 17.9% drop in first-quarter earnings on $12 billion in sales on Monday.

At the end of the first quarter, Home Depot operated a total of 2,258 retail stores, including 1,970 stores in the United States, 166 in Canada, 69 stores in Mexico and 12 stores in China. Home Depot employs more than 300,000 associates, according to the company.

First Published: May 20, 2008: 6:26 AM EDT

Home Depot to close 15 U.S. stores

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[link to money.cnn.com]