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Home Depot Keeps Dry

It acknowledges the bad weather but posts a solid quarter.
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The largest U.S. home improvement chain,

Home Depot

(HD) - Get Report

, stood up to the elements in its first quarter.

The Atlanta-based retailer bested Wall Street's earnings estimates with a 16% jump and reaffirmed its full-year guidance despite the high gas prices and bad weather that weighed on its chief rival.

A day after the No. 2 home improvement retailer,

Lowe's

(LOW) - Get Report

, reported earnings that

fell short of expectations, Home Depot delivered quarterly earnings of $1.2 billion, or 57 cents a share, in the quarter, up from $1.1 billion, or 49 cents a share, in the same quarter last year.

The latest quarter included a charge of $106 million related to a decision to eventually close 15 Expo Design Center stores.

Analysts had been forecasting earnings of just 55 cents a share. Shares of Home Depot were recently trading up $1.70, or 4.5%, to $39.07.

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Although the retailer does not provide quarterly earnings guidance, Home Depot reiterated its fiscal 2005 guidance of for an increase of 10% to 14% in profits on anticipated sales growth of 9% to 12%. Analysts on Wall Street expect the company to post earnings of $2.55 a share on $80.46 billion in sales for the year.

The upbeat report stood in contrast with Lowe's. Lowe's said first-quarter earnings rose 31% from a year ago to $590 million, or 74 cents a share, missing estimates by 2 cents a share. The company blamed bad weather, cost increases and a tepid environment for consumer spending on the miss.

It observed a drop-off in same-store sales during March, which seemed to mirror an April decline reported by

Wal-Mart

(WMT) - Get Report

. Analysts viewed reports of slower sales as potentially signaling another soft spot for consumer spending, brought on by soaring gas prices, high debt levels and rising interest rates.

Home Depot acknowledged some weakness on the part of consumers during the quarter, but management told analysts on a conference call Tuesday that its "exciting product mix" enabled the retailer to post good results.

"While fuel prices may have affected the number of store trips from customers, we have not seen an impact of fuel prices on average ticket sales," said Home Depot's president and chief executive, Bob Nardelli. "We view this as evidence of our ability to execute in a difficult retail environment."

Home Depot's sales rose 8% in the quarter to $19 billion on a 2.1% gain in same-store sales. The average amount spent per visit by each customer in the first quarter rose 5.7% from a year ago to $58.25, the company said. Sales in its services business rose 16% from a year ago, reflecting particular strength in roofing, kitchen, windows and carpet installation.

Weighted average weekly sales per store fell 2.3% from a year ago to $757,000, while the company's overall square footage rose 9.1% in the quarter.

"The stores were well-prepared for spring, and as the weather breaks across the country, we are positioned to take care of our customers," Home Depot said.

Specifically, the company said its share of the appliance market rose by 1.8 percentage points in the period.

"Once again, we're seeing in the first quarter that Lowe's is better at building growth, and Home Depot is better at managing costs at a given if lower level of growth," said Craig Johnson, president of Customer Growth Partners, a retail consulting firm in New Canaan, Conn. (He owns shares in both.) "But net-net, both companies are among the best-performing retailers in any sector."