The resilience of the consumer
Robert Nardelli---Chief Executive
>> home depot is the third largest retamer in the world, and it’s now taking on manhattan. the company is opening a special high-end store geared to upscale urban clients as it looks for ways to expand. ellen braitman spoke with the chief executive, robert nardelli work his new strategy, the resilience of the consumer.
>> we’re feeling pretty good about the consumer. obviously, as most retailers felt a little blip in june, but we’ve come out of that, as we said, at the end of our second quarter, second quarter earnings announcement, and we’re feeling pretty good about the second half. as you know, we raised our estimates for the year on earnings per share for the full year, and we wouldn’t have done that at the earnings call if we weren’t feeling pretty good about the consumer and the second half.
>> some analysts said you raised because of the strength. first half, that it’s not really a positive outlook for the second half.
>> there’s no question the first half, we closed the second quarter with earnings up 25%. if you look at the paris half, it was about 20%, revenue was up 11% in the second quarter, it was up 13% for the first half. so we felt brett pretty good about first half performance. again, we’re going against some pretty aggressive comps over last year. we’re going against 7.7%, 7.8% comp sales, so we’re going to have to do fairly well to be able to generate the sales and the revenue to hold the year.
>> given that you’re positive, one thing i hadn’t realized until half an hour ago, you’re the eighth biggest employer here in the u.s. so how is this optimism translating into how many people you plan to hire this year?
>> well, good question. we feel good about this year, but last year, last year we hired 30,000 net new associates. this year we’ll do about another 25%. we’re still opening a new store every 48 hours. even during the economic down turn, we stayed on strategy. by the end of this year, over the last four years, we will have invested $14 billion back into our company. while at the same time, we just completed $6 billion of stock repurchase. the board approved another billion --
>> i want to break down some of these issues, but while we’re still on the consumer, producer prices came out this morning. they unexpectedly fell. in terms of consumer strength, what are you seeing? how much are you actually able to pass on prices, commod i had prices, for example really have been soaring.
>> well, what we do by policy, again, home depot is everyday low prices, and i certainly want to compliment our suppliers who have been working with us seamlessly to hold prices down. now, what we have seen in the commodity side is probably the biggest increase has been in lumber as they’re rationalizing that industry. it’s a supply-based capacity issue, and we’ve seen higher prices than we would have liked to have seen in lumber that we’ve had to pass on to our consumer, but we have been very responsible and so have our suppliers. we saw a little spike in steel, steel studs. we saw a little increase in copper for a while, particularly as we relate to those commodities like ceiling fans and motors. but again, overall, we’re feeling pretty good about consumer prices.
>> so consumers can tolerate is what you’re saying, a little bit?
>> i think they can, absolutely. if you look at our second quarter, our transactions were up 2.6% year over year. our average ticket is the highest in the history of the company at about $55. so i think the consumer is responding very well, and i think we’re responding in kind to consumer buying preferences.
>> in terms of the consumers, certainly florida a very big focus these days. i know you guys have been shipping from all over the country to get supplies there. is it actually going to translate into higher sales, higher earnings for you in terms of what’s happening there?
>> i think overall it tends to balance out. there’s no question that prehurricane, there’s a frenzy of buying activity for plywood and flashlights and batteries and all of what you might expect as prehurricane kind of protection kits. post-hurricane, of course, you move into generators, you move into chainsaws, you move into tarps and those things that help protect damaged facilities. but remember, during that period, you have no sales. and again, there’s some additional costs related, first time in the history of the company we actually started on the west coast with consolidating trailers to bring chainsaws, to bring generators to the affected area.
>> so overall, it sounds like the bottom line from the store?
>> it’s stable. yeah, i don’t think the goes ins and goes outs pretty consistent with the forecast that we’ve put in place.
>> robert nardelli, chairman and c.e.o. of home depot, speaking with bloomberg’s ellen braitman. shares of home depot ended the day higher. well, trying it avoid a second bankruptcy in two years, u.s. airways gave its pilots’ union a new proposal three days after the group rejected a prior offer. the plan calls for nearly $300 million in pay and benefit cuts. the “new york times” said the airline may seek bankruptcy protection this sunday if unions fail to agree on further benefit cuts. u.s. air may also be forced to violate terms of a $1 billion loan if it’s unable to pay the $110 million in pension payments it owes by wednesday. well, shares in peoplesoft rallied today, suggesting investors are more open to accepting an offer from oracle. that story when we return.
