Many members of the media have pored over
Home Depot (NYSE: HD) and
Lowe's (NYSE: LOW) latest quarterly reports,
eager to glean glimmers of hope for the housing market. Alas,
if there are any such signs in these retailers' numbers, they
look pretty darn dim.
Home Depot's third-quarter earnings revealed a variety of
downward trajectories. Net income fell 8.9% to $689 million,
or $0.41 per share. Revenue dropped 8% to $16.4 billion.
Same-store sales fell 6.9% overall, and 7.1% in U.S.
stores.
Lowe's third quarter displayed similar disappointments.
Net income plunged 29.5% to $344 million, or $0.23 per share.
Sales slid 3% to $11.4 billion, and same-store sales dropped
7.5%.
The companies have been able to bolster margins by cutting
costs, but that approach can only take them so far. Both
Lowe's and Home Depot need to increase sales to lay the
foundation for a true recovery.
I'm glad that Lowe's CEO talked about signs of sequential
improvement in hard-hit areas like California, Florida, and
other areas in the Southwest. On a similarly promising note,
Home Depot's head honcho also observed that the percentage of
domestic GDP devoted to private fixed residential investment
had flattened out, ending its decline.
On the other hand, business from professional customers
still lags that of casual do-it-yourselfers in Home Depot
stores. Clearly, that's a major bummer for anyone eager to
see the retailer build up a higher rate of growth anytime
soon.
Lackluster earnings aren't the only glum news for these
companies. As the government announced today, mortgage
delinquencies continue to hit record highs; the tarnished
silver lining there, I guess, is that the pace of
delinquencies' growth has been slowing. Still, ample reasons
remain for investors to
fear the housing market.
Home Depot tentatively
called a bottomto housing's woes back in June, but that
prediction clearly hasn't panned out yet. For now, retailers
and restaurants like
Wal-Mart Stores (NYSE: WMT),
Costco (Nasdaq: COST) -- which abandoned a
home improvement retail experimentlast spring -- and
McDonald's (NYSE: MCD) might be much safer
homes for investors' money than Home Depot or Lowe's.
This article was originally published as
Will Housing Retailers Ever Turn Around?on
Fool.com
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