It's fair to wonder whether Home Depot's (HD +0.94%) sluggish sales reflect broad-based economic issues that will prove temporary or whether there are more specific challenges confronting the company. I believe it's the former, and Home Depot's shares look attractive to investors willing to exhibit some patience.
The company recently reported fiscal second-quarter results for the period that ended on Aug. 2. What does this reveal about the company's long-term future?
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Admittedly, it's hard to get excited about same-store sales (comps) growing 1.7%, including 1.3% in the United States. Management doesn't expect acceleration this year, with guidance calling for flat to a 2% increase in comps.
However, homeowners have been holding back on major projects. There are several reasons, including high interest rates, that have made borrowing for home purchases (people often do work on their new house) and renovations more expensive.
Despite the sluggish sales growth, earnings per diluted share, adjusted for certain items, increased 5.1% year over year to $4.92. When sales growth improves, the bottom line should grow at a faster pace.
NYSE: HD
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And I'm confident the top-line pace will increase at some time. At the same time, it's hard to say when people will take on major projects and renovations. They seem likely to shop at Home Depot, given it's the largest home-improvement retailer, offering convenience and low prices.
With the stock's upside and 2.9% dividend yield versus 1.1% for the S&P 500 (^GSPC -0.38%), I like Home Depot for its attractive total return potential.
