Home Depot Slides on Profit Decline

Elena
14 Aug, 2007
New York City

Wall Street opened slightly higher Tuesday. Shortly afterwards, market averages turned mixed, reflecting a drop in the trade deficit and benign wholesale-level inflation along with weak results from two leading retail companies. Dow component Wal-Mart fell 4.7% after it cut its full-year earnings outlook, saying underlying performance in Q2 was disappointing. Dome Depot dropped 1.5% after it posted a 15% profit decline and forecast housing market would continue to slow down.

[R]09:45AM Wall Street opened slightly higher. Wal-Mart and Home Depot weighed.[/R]

Wall Street opened slightly higher Tuesday. Shortly afterwards, the market averages turned mixed, reflecting a drop in the trade deficit and benign wholesale inflation along with weak results from two leading retail companies. The Labor Department said wholesale prices rose for the fifth time in six months. In another report, the Commerce Department said the U.S. trade deficit hit a 4-month low in June.

Blue-chip stocks posted losses as Dow component Wal-Mart ((WMT)) fell 4.7% after it cut its full-year earnings outlook, saying underlying performance in Q2 was disappointing. The retailer said its Q2 profit rose 49% but results excluding one-time items missed expectations.

Home Depot ((HD)) dropped 1.5% after it posted a 15% profit decline and forecast housing market would continue to slow down. The world's largest home improvement store chain said sales dropped, particularly same-store sales. Quarterly results beat expectations and the company confirmed that it expects its earnings per share from continuing operations will continue to decline in 2007.

In the first hour of trading, the Dow Jones industrial average fell 18.20, or 0.14%, to 13,218.33. The Standard & Poor's 500 index was up 1.65, or 0.11%, at 1,451.27, and the Nasdaq composite index added 5.44, or 0.21%, at 2,547.68. Bonds fell, with the yield on the benchmark 10-year Treasury note rising to 4.79% from 4.78% late Monday.


[R]09:00AM U.S. stock futures indicated a higher opening on narrower trade deficit.[/R]

U.S. stock futures predicted a flat market opening after economic data showed an unexpected decline in the trade gap and a larger-than-expected increase in producer prices in July.

The Commerce Department said that the U.S. trade deficit narrowed by 1.7% in June to $58.1 billion, coming in below the economist forecast of a deficit of $61.3 billion. Higher energy prices lifted wholesale prices 0.6% to come in above estimates of 0.3%. Core producer price index increased 0.1%, in line with expectations.

Among pre-market highlights, Wal-Mart ((WMT)) dropped 4.9% after it cut its full-year earnings outlook, saying underlying performance in Q2 was disappointing and that many of its customers are under economic pressure. Home Depot ((HD)) added nearly 1% although it posted a 15% profit decline in Q2. It said it expects housing market weakness to extend into 2008.

Further on the economic news front, UBS ((UBS)) reported a 79% jump in Q2 profit, but warned second-half earnings would be lower than last year amid the market crisis. Fossil ((FOSL)) rose 7% in pre-open trade after reporting a 31% profit rise, beating expectations.

The U.S. dollar rose against other major currencies after data showed worse-than-forecast euro-zone economic growth and slower-than-expected U.K. inflation. S&P 500 futures rose 2.2 points at 1,457.30 while Nasdaq 100 futures fell a point at 1,941.50. Dow industrial futures rose 7 points.


[R]8:00AM Wal-Mart profit jumped 49%. The retailer cut 2008 profit.[/R]

The world’s biggest retailer Wal-Mart Stores Inc. ((WMT)) said Tuesday its Q2 net income jumped 49% to $3.11 billion, or 76 cents a share, compared with $2.08 billion, or 50 cents a year ago. Net sales climbed to $91.99 billion from $84.52 billion, while net revenue rose 9% to $93.01 billion from $85.43 billion. Quarterly results generally met estimate of 76 cents of profit on $92.68 billion of revenue.

Considerable reductions on back-to-school merchandise in the last weeks pressured quarterly profit. It took a loss of $863 million in last-year same quarter in connection with the sale of its German operations to Metro. Wal-Mart cut its earnings outlook. For fiscal 2008, Wal-Mart expects earnings of $3.05 to $3.13 a share from continuing operations, down from its previous estimate of $3.15 to $3.23, due to the impact of troubled economy.