Home Depot Shows Housing Market Is Bouncing Back

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  • NEW YORK (AP) — Home Depot Inc.'s net income rose slightly in the third-quarter, as glimmers of a housing market recovery start to appear. Storm-preparation also added to sales and offset costs related to closing stores in China.

    Results beat expectations and the company also raised its forecast for the year. Shares rose nearly four percent.

    Home improvement companies have long been under pressure due to the weak housing market, as consumers cut back on large-scale renovation projects. But they stand ready to benefit as evidence mounts that the housing market is slowly improving.

    Superstorm Sandy also spurred sales, but executives were cautious about forecasting how much they thought they would benefit from the storm due to the extensive damage and slow recovery.

    "Our customers are still very much in turmoil," said CFO Carol Tome.

    Sandy devastated the East Coast at the end of October, shortly after the quarter ended. Its damage was still being dealt with, as evidenced by one question from an analyst.

    "Can you get more generators in your store in Vauxhall, N.J.?," asked Credit Suisse analyst Gary Balter semi-seriously.

    In the last week of the third quarter, the company garnered a $70 million lift from sales of batteries and flashlights, generators and extension cords.

    Ultimately the company said it expects Sandy will generate about as much revenue as last year's Hurricane Irene, which garnered $360 million in sales off of $16 billion in hurricane damage. Sandy has caused $20 billion in damage, so sales could be greater. But they're different types of storms, with Irene causing more wind damage and Sandy causing more flooding, so the total benefit and timing is uncertain.

    The slowly improving housing market was another focus for the quarter. Data shows the housing market is slowly improving, with U.S. home prices and new home sales pace increasing, although they remain well below peak levels.

    Home Depot's CEO Frank Blake said both contributed to quarterly results.

    "Our third-quarter results were better than we expected and reflected, in part, what we believe is the start of the path toward the healing of the housing market," he said in a statement.

    In a call with analysts, he added that he sees the housing market becoming "an assist to our growth rather than an anchor."

    Customer transactions over $900, about 20 percent of sales, rose 4.3 percent during the quarter, driven by purchases of appliances, flooring and kitchens.

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