Home Depot, Inc. (HD: Quote) said Thursday it will close its remaining seven big box stores in China as the home improvement retailer shifts its focus in that market to specialty stores and online offerings.
The closing will impact about 850 employees, who will be provided severance packages and receive job placement assistance.
Home Depot said that as a result of the store closings, it will record an after-tax charge of about $160 million or $0.10 per share in the third quarter of 2012. The charge includes impairment of goodwill and other assets, lease terminations, severance and other charges associated with closing the stores.
Excluding the charge, the company still expects fiscal 2012 earnings per share to increase about 19 percent to $2.95, which is in line with its prior guidance.
On average, twenty seven analysts polled by Thomson Reuters expect the company to report earnings per share of $2.97 for the year. Analysts' estimates typically exclude special items.
Home Depot said that while it is closing its big box stores, it will maintain a new formats team in China to continue research and development activities.
The company will also maintain two recently-opened specialty stores - a paint and flooring store and a Home Decorators Collection store, both located in Tianjin.
In addition, the company is developing relationships with several of China's leading e-commerce websites, which it believes is more tailored to Chinese customers' needs and shopping preferences.
Home Depot will continue to employ about 170 associates in China. They will work in the sourcing offices in Shanghai and Shenzhen, which opened in 2002, and also work on its new retail formats team and in the specialty stores.
In mid-August, Home Depot reported a better-than-expected profit for the second quarter as comparable store sales were benefited by continued demand for core products.
Net earnings for the quarter rose to $1.53 billion or $1.01 per share from $1.36 billion or $0.86 per share in the prior-year period. Sales for the quarter edged up to $20.57 billion from last year's $20.23 billion in the year-ago period.
HD closed Thursday's regular session at $58.30, up $1.25 or 2.19 percent on a volume of 10.77 million shares. In after-hours, the stock further gained $0.03 or 0.05 percent to $58.33.
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by RTT Staff Writer
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