Home Depot now expects to report fiscal year 2003 earnings growth of 17% to 19% from 2002, above its previous 15%-17% forecast. Based on 2002 earnings of $1.56 per share, that puts 2003 EPS between $1.83 and $1.85. The company also said that sales would increase 11%, with same-store sales growth of 3.8%.
Expansion continues, albeit at a slower pace. In fiscal 2004, the company will add 175 stores, including 14 in Canada and nine in Mexico, though 25 new store openings were moved from January into February. In each of the last three years, the company set new store openings at 200 per year.
In the face of stiff competition from Lowe's (NYES: LOW), Home Depot has apparently deemphasized pure store growth. Instead, it has turned its focus to enhancing existing stores, "extending the business through such efforts as At-Home Services, tool rental centers, and the homedepot.com Web site."
To this end, new self-checkout systems have been installed, including two-way cordless can guns, while e-learning has improved "associate's know-how on the floor." Earlier this month, Home Depot bolstered its flooring business through the acquisition of Creative Touch Interiors.
For fiscal year 2004, Home Depot expects sales growth of 9%-12%, and earnings growth before an accounting change of between 10% and 14%. Meanwhile, the company anticipates same-store sales growth of 3%-6%. The company also pegged capital expenditures at $3.7 billion for the year.
Put it together, and Home Depot has turned things around dramatically from this time last year. With a strong 2003 and a positive 2004, the shares look reasonably priced at about 17 times 2004 earnings.