Home Depot slashes Profit Forecast

The Home Depot Inc., the world's largest home-improvement retailer slashed its annual profit forecast to between 15% and 18%, lower than the 9% drop it was expecting earlier in May. Weak conditions in the U.S. housing market and the sale of the HD Supply unit have led to the decline.

Last month, Home Depot agreed to sell the HD supply unit to a group of private equity firms for $10.3 billion. It is now updating its guidance to reflect the unit as a suspended operation.

The retailer has also anticipated the total retail sales to slip between 1% and 2%. The company said its updated earnings per share guidance are not inclusive of the gain on the sale of HD Supply.

However, the Atlanta-based company plans to carry on with store openings even as the housing-market decline limits demand for renovations. “While we expect the housing market to remain challenging for the rest of 2007 and into 2008, we plan to continue our reinvestment plans, for the long-term health of our business, understanding that it will put short-term pressure on earnings,” Chief Financial Officer Carol Tome said in a statement. "We are confident that over the long term, we will deliver productivity improvements and enhance returns on invested capital as the investments take hold."

Last month, Home Depot proclaimed it plans to buy back a record $22.5 billion of its stock and today the retailer announced a tender offer for as many as 250 million shares for between $39 and $44 per share. The offer is scheduled to expire on August 16.

Home Depot already has more than 2,000 stores in the United States, Canada, Mexico and China, and Tuesday the company said, it will open approximately 108 new stores in fiscal 2007.

Home Depot shares went down 7 cents on Monday to close at $40.23.