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Home Improvement Retail Recovery, a Work in Progress

Home Improvement Retail Recovery, a Work in Progress
Doug
  • On May 2, 2011

Home-Depot-SalesHome improvement retailers are finally seeing light at the end of the tunnel after the longest drought in sales they’ve ever experienced.  Both Lowe’s and Home Depot reported an increase in same-store sales in recent months, a sign that a long-awaited recovery is around the corner. But executives are tempering their optimism with warnings that the housing market will take years to truly recover and that improvement will be slow to come.

Home Depot last month reported a 2.8 percent increase in sales for 2010, its first year-over-year increase since 2006 when the housing market began to collapse. Home DepotHome Depot CEO Frank Blake said the sales increase was encouraging.

“In 2010, we continued to invest in our business and made solid progress against our key initiatives,” said Blake. “Our actions, coupled with an improving economy, resulted in positive sales growth for the year for the first time since 2006.”

Sales accelerated in the fourth quarter, with a 72% increase in earnings of $487 million and a 3.8% increase in net sales of $15.1 billion. Same-store sales rose 3.8% for the quarter.

In another sign that Home Depot is confident things are turning around, it heavily promoted sales of appliances during the quarter and took market share away from rival Lowe’s. Sales of high-ticket items like appliances have been a weak link for Home Depot since the housing market crashed in 2007.

Lowe’s results weren’t as good. Home Depot’s smaller rival reported just a 1.1 percent increase in same-store sales for its most recent quarter.Lowe's

“We delivered solid results, including earnings that exceeded our guidance,” said Lowe’s CEO Robert Niblock. “While uncertainty in the market remains, the economic recovery is continuing.” Lowe’s expects same-store sales to increase 1 to 2 percent in 2011 but plans to open 25 to 30 new stores despite the lukewarm forecast.

But as the housing market goes, so goes Home Depot and Lowe’s and the market is still showing little signs of life. According to statistics released in April by the National Association of Realtors, home sales are down 7 percent so far in 2011 compared to the same period in 2010 even though average home prices have dropped 6 percent during that time.

But on a bright note, Freddie Mac is projecting a 5 percent jump in housing sales during the second half of 2011. If that comes to pass, both Lowe’s and Home Depot will see their sales accelerate. But, given the uncertainty in the market, it’s hard to have faith in forecasts so both retailers will have to sit and hope the housing market rebound finally arrives.

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