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Among home-improvement retailers, Home Depot (NYSE:HD) has been a leader for a long time, having joined the Dow Jones Industrials (DJINDICES:^DJI) in part on the strength of its long-term growth. Even after suffering a temporary slowdown early this year due to a harsh winter, Home Depot bounced back at midyear, but investors were watching closely to see how the retailer would do in its fiscal third quarter. In Tuesday morning's quarterly release, Home Depot once again showed that its growth story remains intact, but the company still faces some challenges that it will have to address in order to maximize its potential.

Let's take a closer look at how Home Depot did last quarter and whether the retailer can keep up its pace.

Home Depot: Building a strong foundation
Home Depot's headline numbers gave investors everything they were looking for and more. Revenue climbed 5.4% to $20.52 billion, topping the $20.47 billion that most investors had expected Home Depot to post. Same-store sales rose 5.2% across the system, and Home Depot's U.S. locations saw comparable-store sales rise at an even faster 5.8% rate. Net income climbed at an even better rate, with $1.54 billion in earnings representing a nearly 14% gain from year-ago levels. Earnings per share posted even stronger growth, with a reduction in share count contributing to a 21% jump in diluted EPS to $1.15, coming in above the $1.13 consensus estimate.

Yet a couple of additional factors deserve note. First is that the company got a roughly $100 million boost from selling part of its stake in HD Supply Holdings (NASDAQ:HDS). That helped push net income higher, although it didn't affect revenue, and most analysts had already taken the figure into account.

More importantly for nervous shareholders, Home Depot said that it had net expenses of $28 million related to the retailer's breach of customer data. As part of its guidance, Home Depot expects the total spent on the breach to rise to about $34 million.

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CEO Craig Menear. Source: Home Depot

Nevertheless, CEO Craig Menear was generally pleased with the results, noting "strong performance across all geographies led by growth in transactions and continued strength in the core of the store." Looking forward, Home Depot repeated its previous guidance for the full 2014 fiscal year, which ends in January, with sales expected to climb 4.8% and earnings per share of $4.54 representing 21% growth from fiscal 2013. Those figures are generally in line with investor expectations, and under ordinary circumstances would likely have led to a positive response from shareholders.

How Home Depot is moving forward
The troubling factor that stood out in Home Depot's release, though, was that it chose not to issue firm guidance specifically addressing consequential damages from its data breach. Although the $34 million figure includes the best-known costs that Home Depot will bear as a result of the breach, the company expects that it might have to reimburse card networks for some of the costs of fraudulent charges and reissuing cards. Home Depot also has its own in-house store card that might bear the brunt of some of those costs, and with regulators looking closely at what happened to the home-improvement retailer, Home Depot can't rule out the possibility of fines or other financial penalties from government enforcement efforts. Perhaps most importantly, Home Depot hasn't yet made estimates on what it will take for the company to fix the problem going forward.

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Source: Home Depot

Already, though, reports suggest that the breach might be more costly than anticipated. Last month, a survey of credit unions found that 7.2 million debit and credit cards held by credit-union customers suffered from the breach, costing the institutions about $60 million. That's twice as much as they paid after Target's (NYSE:TGT) similar breach, and given that Target said in August that it expected its final cost to come in at $148 million, Home Depot could end up paying an even higher amount when all's said and done.

After the earnings announcement, Home Depot shares eased lower by less than 1%, as the continued uncertainty about the extent and eventual resolution of the data breach seemed to weigh on investor sentiment. From a fundamental standpoint, though, Home Depot's business appears completely sound, and as long as the company acts quickly and decisively to fix the vulnerabilities that led to the breach in the first place, Home Depot looks poised to continue the recent move higher in its stock price.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends BMW, Home Depot, and Nike. The Motley Fool owns shares of Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.