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Home Depot profit drops 29.5 percent

The company attributed the first-quarter slide to housing-market weakness and weather.

ATLANTA - The Home Depot Inc. posted a 29.5 percent drop in first-quarter profit yesterday and warned that the rest of the year would be challenging.

The company cited erratic weather and continued weakness in the housing market as contributors to its drop in earnings.

"While we expected a tough quarter, this was worse than we expected," chief executive officer Frank Blake said in a conference call with analysts.

The company also said it had not decided the fate of its wholesale-distribution arm, three months after announcing it might shed the unit.

Analysts were eager to get an update on the Atlanta-based company's review of whether it would sell, spin off or keep its HD Supply unit. But the world's largest home-improvement store chain was mum on its plans.

"I have to say I don't see this at all as a delay," Blake told analysts in the conference call to discuss the company's disappointing earnings report.

Blake said he hoped the review, which was announced Feb. 12, did not take more than an additional three months, though he would not commit to making a decision by the end of the second quarter.

Chief financial officer Carol Tome said in an interview that Home Depot had received inquiries from interested parties seeking to discuss buying a piece or all of the supply unit. She would not say whether there had been any formal offers, or name the interested parties.

Tome acknowledged that the uncertainty over what would become of HD Supply, which serves contractors, home builders, and other business customers, had been a distraction for the unit and the entire company.

"It's very distracting, and we would like to bring this to a close as quickly as possible," Tome said.

Home Depot's first-quarter profit fell short of Wall Street expectations, and the company's shares slipped 71 cents to settle at $38.30.

Home Depot said that for the three months ended April 29, it earned $1.05 billion, or 53 cents a share, compared with a profit of $1.48 billion, or 70 cents a share, in the same period a year earlier.

Analysts surveyed by Thomson Financial were expecting Home Depot to report earnings of 59 cents a share.

At the end of the first quarter, Home Depot operated 2,170 stores in the United States, Canada, Mexico and China.