Home improvement retailers, Home Depot (NYSE:) and Lowe's (NYSE:), have seen their sales surge during the pandemic. With the housing market remaining strong, that winning streak, which has so far spanned six quarters, is likely to continue when both companies announce their final earnings in the coming week. In industries battered by lockdowns and social distancing measures, home sales across the US have skyrocketed as many Americans have chosen to move to the suburbs, seeking more remote space, and remote school and home offices.
House prices rose in nearly every corner of the US in the second quarter as strong demand continued to overwhelm supply of homes for sale. That shift is encouraging for both retailers, as homeowners tend to spend more than renters on renovations. As home values ??rise, people feel good about investing in their homes in general," Home Depot chief executive Craig Menear said during a conference call with analysts in May. "That alone, I think, is a very positive view of home improvement as you go along."
Home Depot will report tomorrow, Tuesday, August 17, before the market opens. Analysts expect earnings per share of $4.42 on revenue of $40.48 billion. Lowe's reports the following day, Wednesday, August 18, for the opening. It could see its revenue rise to $26.65 billion and earnings per share to $3.99. in recent months after commodity prices rose. But the most recent figures indicate that these home improvement chains are actually benefiting from this inflationary environment.
Big ticket sales at HD indicated a strong willingness of shoppers to spend on home improvement in the . Sales of items over $1,000 were up about 50% on a like-for-like basis year-over-year. The average ticket rose to $82.37 in the first quarter from $74.70. Home Depot's customer transactions rose to 447.2 million in the quarter, from 374.8 million a year earlier.
HD's main competitor Lowe's is winning more business from home professionals, who are a more lucrative and stable type of customer. According to the latest guidelines:
“Better-than-expected year-to-date and a supportive macroeconomic background bolster the company's confidence in its ability to deliver strong results for the fiscal year, including continued market share gains and achieving an operating margin of 12 %. ”
Shares of both home improvement giants have continued to rise this year, with HD up 25% and Lowe up about 20%. Some analysts believe this strength is likely to continue as demand for home renovation continues to grow. “We remain optimistic about the stocks of Home Depot, Lowe's and Floor & Décor, all of which we believe are well positioned in the current renovation environment,” Bank of America said in a recent note. This should remain so as long as the US housing market remains strong, fueled by a low interest rate environment.
