Why Home Depot's Thinking Outside the Big Box

NEW YORK (TheStreet) -- With better-than-expected results coming out from J.C. Penney (JCP), the Street has become more optimistic about the long list of retail results due out this week. Chief among them is home improvement giant Home Depot (HD), whose first-quarter results come out Tuesday.

The retail giant has benefited handsomely over the past year, after sales were boosted following super-storm Sandy's destruction along the East Coast. Sandy spurred consumers' need to spend on thing to repair their homes. This year the biggest concern has been the weather, which, in the February quarter, Home Depot cited as the main reason for its revenue miss.

Management adjusted quickly, however. With strategic cost-controls and centralizing the company's distribution centers, Home Depot was able to offset the revenue miss with a 4% decline in operating expenses. This led to a 10 basis-point expansion in gross margin and a 7% jump in earnings per share. Analysts were equally impressed with the company's 5% same-store-sales growth in the U.S., which was unexpected, given the inclement weather. On Tuesday, investors are hoping for more of the same.

The Street will be looking for 99 cents in earnings per share on revenue of $19.95 billion, which reflects year-over-year growth of 4% and 19%, respectively. Recent housing data have soured investors' mood about the strength of the U.S. economy. And this has justified lowered estimates over the past three months. But that's not entirely a bad situation of Home Depot. The company should have no problem meeting/beating these targets.

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