Home Depot lifts outlook as profit tops estimates; Analysts say retailer has 'turned the tide' against smaller rival Lowe's

Home Depot Inc., the world's largest home-improvement retailer, said 2nd-Q profit fell 7.2% as high unemployment & troubled housing market combined to sap consumers' appetite for big-ticket, discretionary items. The Atlanta-based company, however, lifted its profit forecast for the year, with the profit decline in the 2nd-Q coming in lower than Wall Street expected. Shares of Home Depot, a Dow component, rose 3.1% to close at $26.93. Against a still-tough economic outlook, CEO Frank Blake said on a conference call Home Depot saw some positive signs, including retailer's 1st positive comparable transactions in the U.S. for the first time in more than 5 years, as well as its biggest gain in total market share in 5 years. It also marked improvement in some of its most important & most hard-hit areas, such as FL & CA, with 3/4 of its top 40 markets performing better sequentially. Paint sales on a same-store sales basis had the first gain this year as consumers take on more repair & maintenance jobs on their own, CFO Carol Tome said. She added it introduced products such as Behr paint & primer in one can to spur demand in the category. Home Depot also has launched a "More saving, more doing" campaign, lowered product prices and kept merchandise in stock. It installed software that allows store managers to go online and check their expenses & orders against targets & tapped consumer-research consultant Dunnhumby to give it a better view of the difference between its regular shoppers & professional contractors -- a group that makes up 3% of its customer base but reps over 1/4 of the company's sales, according to Tome. "Our company is running better business. We're looking ahead & making major investments. Still, the environment remains challenging. Our outlook remains cautious," she told MarketWatch. He said he doesn't expect same-store sales to be positive until sometime next year since private, fixed-residential investment as a percent of GDP is at 2.4%, the lowest level in over 60 years. "The larger question for us is when will we start to see a broader market turnaround?" he commented. While there's some signs of the recession nearing an end & housing market reaching a bottom, foreclosure rates & consumer savings rate remained at a record high. The Commerce Dept. reported U.S. housing starts in July unexpectedly declined, hurt by a drop in multifamily units. Net income for the three months ended Aug. 2 slid to $1.12B, or 66