Home Depot is Latest Victim of U.S. Housing Slump
By Mike Caggeso
The troubles of Home Depot Inc. (NYSE: HD) continued to mount yesterday (Tuesday), when the home-improvement retailer announced that its fiscal second-quarter net income dropped 15%, a blow dealt primarily by the weak housing market.
In addition, the company hinted at postponing its proposed $10.3 billion sale of HD Supply to private-equity firms Bain Capital LLC, Carlyle Group and Clayton, Dubilier & Rice Inc. And that could stall Home Depot’s plans to buy back 250 million shares.
A statement released by Home Depot said the company will “continue to assess financial market conditions, and the impact of any restructured HD Supply transaction to sell its supply business, or failure to complete that transaction, on its overall recapitalization plan and on the terms of the tender offer part of that plan.”
Translation: Like many companies involved with the housing or home-mortgage sectors, it’s trying to patch a leaky roof in the middle of a monsoon.
The financial storm caused by the deteriorating credit and real-estate markets has singed banks, mortgage firms, homebuilders, and even suppliers such as Home Depot.
Many analysts consider Home Depot a key yardstick that measures the housing industry’s ongoing health. And Home Depot Chairman and CEO Frank Blake no doubt chooses his words carefully when speaking about Home Depot’s current downswing.
“We believe the housing and home improvement markets will remain soft into 2008,” he said in a prepared statement. “We will continue to invest thoughtfully for the long-term health of the business.”
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