Home Depot "Executing Well," J.P. Morgan Reports

In a report released this morning, J.P. Morgan focused on The Home Depot, Inc. HD, which it said is executing well. “As we have been consistently highlighting in our annual Spring trek around the country visiting HD and Lowe's Companies Inc. LOW stores, Big Orange continues to out-execute LOW by driving better traffic (down ~1.9% for HD vs. -3.4% for LOW) and ticket (up ~1.5% vs. +0.1%) through sharper merchandising, advertising, and execution,” J.P. Morgan writes. “Comps of only down 70 bps in the U.S. with one of the wettest April's on record (and against one of the nicest April's a year ago) speaks to the momentum at the company. Notably while the headline EPS was in line with the Street, operating income dollars were 4% higher than our forecast driven by a solid 20-bp improvement in gross margin and strong expense control. Inventories are up 1.9% at the end of 1Q suggesting that HD started 2Q on clean footing with some markdowns already behind them (as gross margin expansion moderated 10-20 bps from the previous trend). “HD bought back $1.3B in stock vs. $975MM forecasted and annual guidance of $2.5B. Clearly the $1B accelerated share repo is driving this but we continue to forecast ~$4B of repurchase activity in 2011, considerably higher than guidance.” Home Depot closed Monday at $36.98.