Home improvement retailer Home Depot cut its 2007 earnings outlook on Tuesday, citing weakness in the U.S. housing market and said it was launching a tender offer for 250 million shares.

Home Depot said it expected 2007 earnings per share to fall 15 percent to 18 percent from a year earlier, to a range of $2.30 to $2.36 per share.

The company earned $2.79 per share in fiscal 2006.

Home Depot said it expected 2007 total retail sales to decline by 1 percent to 2 percent and same-store sales to fall by mid-single digits.

Previously, Home Depot had forecast total sales growth of 0 percent to 2 percent.

The Atlanta-based company said its updated targets reflect its HD Supply business, which provides building materials to contractors, as a discontinued operation. That business is set to be sold for $10.3 billion to a group of private equity firms.

Home Depot's May forecast, which had included the discontinued business, had called for a 9 percent decline in annual profit.

Stripping out a contribution by the HD Supply business, the company's earlier forecast had estimated a 15 percent decline in full-year profit to $2.36 per share.

While we expect the housing market to remain challenging for the rest of 2007 and into 2008, we plan to continue our reinvestment plans for the long-term health of our business, understanding that it will put short-term pressure on earnings, Chief Financial Officer Carol Tome said in a statement.

The company also said it was launching a tender offer for 250 million shares for between $39 and $44 per share, or up to $11 billion. The tender offer is set to expire on August 16, it said.

In June, its board authorized a $22.5 billion increase in a stock repurchase program.

The company said it plans to open about 108 new stores this fiscal year, and its operating margin would decline by 1.5 percentage points due to the negative same-store sales and investments in its operations.

Home Depot, a component of the Dow Jones industrial average , was down about 1 percent at $39.75 in electronic trading, compared with its Monday close of $40.23 on the New York Stock Exchange.

Retail sales