• by Sarah Mahoney , March 1, 2007

Home Depot, which reported disappointing results for the fourth quarter last week, yesterday told investors not to hold their breath for a quick recovery. The company said it isn't expecting the residential construction and housing market to bounce back until "late in the second half of 2007 or early 2008."

As a result, it predicts that comparable-store sales for 2007 will be "in the negative mid-single-digit area." And it expects total sales growth to be between 0 and 2%. HD Supply, which currently accounts for 13% of total sales, is expected to increase to 15% of the total. The company has said it is exploring the sale of that less profitable division (a strategy engineered by ex-CEO Bob Nardelli, who left early this year) in order to focus on its core retail consumer.

By contrast, Lowe's, Home Depot's chief competitor and the second-biggest home-improvement company, recently said it believes its sales trends have bottomed. It expects sales growth of 10% in fiscal 2007, with comparable store sales coming in flat or up 2%.

Home Depot, which has been under pressure from activist investors, also outlined its strategy to strengthen its brand. The company said it would spend $2.2 billion in fiscal 2007, including $360 million to beef up its ranks of associates, including recruitment of master trade specialists, technology-enabled customer assistance, and redesigned compensation and reward plans. It will spend another $260 million on merchandising initiatives, $275 million on improving product availability, $865 million to makes stores cleaner and less cluttered, and $415 million on loyalty programs.