Home Depot, America’s biggest DIY retailer, withdrew plans for a $10 billion (£4.8 billion) share buyback programme yesterday in an attempt to conserve cash in a deteriorating housing market.

The group said that it would not be “prudent” in present market conditions to complete the last half of the buyback programme as it said that third-quarter profits had fallen 27 per cent. Home Depot also said that it had not been “pessimistic enough” about the slide in America’s housing market and expected earnings to deteriorate further over the year.

America is experiencing its most severe property recession for 16 years. Home Depot’s bleak outlook came as statistics showed that consumer confidence had fallen to a new two-year low as shoppers were weighed down by worries about the housing market and surging oil prices. According to the TechnoMetrica Market Intelligence index, the key confidence measure dived to 43.8 in November from October’s 47.3. This month’s reading was the third-lowest in the seven-year history of the series and ranked after those of September and October 2005 in the aftermath of hurricanes Katrina and Rita.

Raghavan Mayur, a TMI spokesman, said: “Americans are spooked about the future. High fuel prices, rising retail prices and the mortgage crisis are also to blame.”

There are concerns that the troubles in the housing market, which have resulted in credit-related losses and huge job cuts by American banks, will spill over and limit consumers’ ability to spend.

For the year as a whole, Home Depot predicted a decline of as much as 11 per cent in earnings per share because of persistent “softness in the housing market”.

Frank Blake, the company’s chairman and chief executive, said yesterday: “We started the year with a more pessimistic view of the housing and home improvement markets than many. It turns out we were not pessimistic enough.”

Home Depot said that it had earned $1.09 billion in the three months ending on October 28, compared with a profit of $1.49 billion for the same period a year ago. The company had expected “some market improvement” by the third quarter but that did not happen, Mr Blake said.

Blaming volatility in the credit markets and “challenging” housing and home improvement markets, the company said that it would not “execute the remainder” of its share buyback programme, of which about $10 billion has yet to be completed. Mr Blake added: “We expect continued difficult conditions for the remainder of 2007 and expect that the soft market will continue, as reflected in the current overhang of housing inventory and the difficulties in the subprime mortgage market.”

Shares on a buoyant Wall Street rose 66 cents to close at $29.12. Their value has fallen sharply since the beginning of the year, however, when they reached more than $40.

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