The largest U.S. home improvement retailer said it expects its revenue to rise 2.3 percent in 2010 and 2 percent to 2.5 percent in 2011 as the housing market remains uncertain and remodeling no longer seems like a surefire way to add value to a home.
"We know major renovation has been in decline for the past few years," said Craig Menear, vice president of merchandising, during an investor meeting in Boston that was webcast on Wednesday.
Instead, he said, homeowners who expect to stay where they are longer are increasingly focused on maintenance and repair projects that lower the operating costs of their home.
Menear said the company is adjusting to this emphasis on smaller projects. In test markets, Home Depot is shrinking its kitchen display areas by as much as 40 percent and using the space to sell bathroom vanities, flooring, tiles and cleaning products - items for projects that are cheaper than major kitchen renovations.
Home Depot also is improving its website because many customers do research online before coming to a store, and it is offering in-store pickup for online orders.
The retailer now expects full-year net income from continuing operations to be $1.97 per share. That's up from prior guidance of $1.94 per share. Analysts polled by Thomson Reuters, on average, also predict $1.94 per share.
The company now expects revenue to rise 2.3 percent, up from the 2.2 percent rise expected previously, implying revenue of $67.7 billion. Analysts expect revenue of $67.59 billion.
The modest increase, coming two months after Home Depot previously raised its guidance, is "encouraging," said Wall Street Strategies analyst Brian Sozzi. He said it signals revenue in stores open at least a year has held its own. On the heels of a 3.5 percent increase in October revenue in stores open at least a year, "momentum seems to have been sustained."
likely on demand for cold-weather items and seasonal buying," Sozzi said.
Revenue in stores open at least a year is expected to rise in the low single digits for the full year.
The figure is considered a key measure of a retailer's financial health because it excludes stores that opened or closed during the year.
For 2011, Home Depot predicts its earning per share from continuing operations before share repurchases will rise 7 percent to 9 percent, or 11 percent to 13 percent after share repurchases.
Home Depot, based in Atlanta, plans to open 10 new stores in 2011, including seven in Mexico. It plans $1.3 billion in capital expenditures and about $2.5 billion in share repurchases.
As the company approaches its peak selling season in the spring, Tome said it plans to hire more staff but didn't give details.
Home Depot operates 2,246 stores in the U.S., Mexico and Canada. Shares rose 53 cents to $34.08 during afternoon trading.