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Home Depot CEO: ‘Getting Awfully Close To The Bottom’ In Housing

Sep.03, 2008 in U.S Hot Stocks

Home Depot Inc. (HD) Chairman and Chief Executive Frank Blake said some recent
housing trends indicate “we’re getting awfully close to the bottom” of the
current correction.

During a presentation at a Goldman Sachs retail conference, Blake pointed to
trends showing private residential investment has fallen to about 3.5% of gross
domestic product at the end of the second quarter from a peak of about 6.25% at
the end of 2005. Other housing data, such as mortgage equity withdrawal rates,
also indicate “a lot of the over-exuberance in our market is getting squeezed
out,” Blake said.

“We don’t think we’re at the bottom yet, but we think you can see it from here,”
he said.

-By Mary Ellen Lloyd, Dow Jones Newswires, 704-948-9145;
maryellen.lloyd@dowjones.com

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(Adds stock price and additional comments on industry, margin outlook.)

By Mary Ellen Lloyd
Of DOW JONES NEWSWIRES

Home Depot Inc. (HD) Chairman and Chief Executive Frank Blake said some recent
housing trends indicate “we’re getting awfully close to the bottom” of the
current correction.

During a presentation at a Goldman Sachs retail conference Wednesday, Blake
pointed to trends showing private residential investment has fallen to about 3.5%
of gross domestic product at the end of the second quarter from a peak of about
6.25% at the end of 2005. Other housing data, such as mortgage equity withdrawal
rates, also indicate “a lot of the over-exuberance in our market is getting
squeezed out,” Blake said.

“We don’t think we’re at the bottom yet, but we think you can see it from here,”
he said. Home Depot shares were recently up 13 cents at about $28.20. Blake
reiterated his comments from last month’s second-quarter earnings presentation
that Home Depot’s plans are based on the home-improvement industry “remaining
under pressure, certainly through the rest of this year and probably into part of
2009.”

“We are not looking for that bend in the curve at least through the end of this
year,” he said.

Every percentage point decline in same-store sales translates into a 20 basis
point hit to operating margin, Blake reiterated. “So as we look forward to the
remainder of the year, you expect to see continued pressure (on the operating
margin), and that’s consistent with our guidance,” he said.

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