By Dhanya Skariachan
NEW YORK (Reuters) - Home Depot Inc
The company posted a higher-than-expected quarterly profit and raised its full-year earnings forecast on Tuesday, helped by cost controls. While sales missed expectations in a weak economy, investors were relieved that the top home improvement chain still expects an increase for the rest of the year.
Home Depot's results echoed those of smaller rival Lowe's Cos
For a graphic on Home Depot's results, click on http://link.reuters.com/wuf55n.
Home Depot forecast earnings of $1.90 a share from continuing operations in the current fiscal year, up 2 cents from its prior outlook. For the prior year, it reported profit of $1.66 a share from continuing operations, excluding charges.
The company expects sales growth of about 2.6 percent, down from a prior view of 3.5 percent.
Home Depot is implying a 2 percent same-store sales gain for the second half of 2010, similar to Lowe's, JPMorgan analyst Christopher Horvers said.
"The top-line guidance should relieve concerns that its competitor (Lowe's) was being too aggressive on its sales forecast and supports our view that modest comps are achievable based largely on repair and maintenance spending," Horvers added.
Home Depot shares rose 1.9 percent to $27.90 in premarket trading, while Lowe's gained 1.5 percent to $20.00.
MANAGING COSTS
Like many other retailers, Home Depot has tightly managed costs to offset tepid sales. It has benefited from a slower expansion strategy, improvements to its supply chain and cost cuts that included job reductions in January.
But while U.S. consumers have selectively spent on repairs and replaced some appliances for more energy-efficient ones, both home improvement chains have yet to see demand for more expensive home projects such as special-order kitchens.
Home Depot's net income rose to $1.2 billion, or 72 cents a share, in the second quarter ended August 1 from $1.1 billion, or 66 cents a share, a year earlier.
Analysts on average were expecting 71 cents a share, according to Thomson Reuters I/B/E/S.
Sales rose 1.8 percent to $19.41 billion, missing the average estimate of $19.59 billion.
Sales at stores open at least a year rose 1.7 percent globally. UBS analyst William Truelove had expected an increase of 3.5 percent, while Wall Street on average had forecast growth of 2.3 percent, according to an early note.
Same-stores sales rose 1 percent in the United States, the company's main market. Lowe's, which has few stores outside the United States, posted a 1.6 percent increase for its latest quarter.
(Reporting by Dhanya Skariachan; Editing by Michele Gershberg, Lisa Von Ahn)
