The Home Depot effect
A rise in the retailer's earnings lifts many boats.
Net income at the Atlanta retailer was $774 million, or 50 cents a share, up 32% from $587 million, or 36 cents a share, a year ago. Revenue rose 5.9% to $16 billion, fueled by a 5.7% increase in same-store sales and an unusually mild winter. The results topped Wall Street expectations for 42 cents a share.
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Shares of the largest home improvement chain are up more than 13% this year. Wall Street analysts have a one-year price target of $46.13 on the stock -- below where it trades now. Nonetheless, the shares have more room to run. Indeed, who would have thought Home Depot would post such a strong quarter in the dead of winter? Imagine how well the chain might do once the spring remodeling season starts.
Confidence among U.S. homebuilders, some of which are Home Depot customers, is the highest it's been since 2007. Construction employment has risen by 52,000 since January, while nonresidential specialty trade contractors added 30,000 jobs. There are even signs that the housing market is rebounding.
If consumer confidence continues to rise, Americans will open their checkbooks to fund do-it-yourself maintenance projects they delayed when they were less sure of their finances. People will also dust off projects such as deck additions and fund maintenance chores like roof repairs that were delayed because people were less sure of their financial futures.
This is good news for the small contractors who buy their supplies at Home Depot. Ditto for the construction workers who have borne the brunt of the worst economic slowdown since the Great Depression. Once these workers get some extra money in their pockets, they will make some discretionary purchases. And while many remain leery about spending too much too fast because they got burned during the slowdown by taking on more debt than they could afford, spending is bound to improve.
When Home Depot wins, so do lots of people who don't know one end of a hammer from another.
Jonathan Berr does not own shares of the companies listed here.
Could it have something to do with the winter being 10 degrees warmer this year than the last three or four years? Makes it easier to build when the ground isn't frozen. I know there are some major construction projects around here that seem to be moving really fast for the winter.
I WORK FOR AN INDEPENDENT LUMBER COMPANY IN R.I.
THAT HAS BEEN IN AROUND FOR 100-YRS (1911-2011)!. WE HAVE FELT THE SOME AFFECT OF "HOME DEPT." OVER THE PAST SEVERAL YEARS AND GLAD THAT THEY
ONLY BRING IN MATERIAL THAT "REAL" CONTRACTOR'S WON'T USE DO
TO QUALITY AND SERV. IT'S ALWAYS NICE WHEN THE PEOPLE AT "HD"
DON'T KNOW THE BUILDING CODES OR WIND-ZONES THAT ARE REQ.
IN THE STATE FROM TOWN TO TOWN WHICH COULD LEAD TO ALOT OF $$$$$ WASTED
IN RE-ORDERS. REAL BUILDERS SHOULD STICK WITH REAL LUMBER YARDS
THAT HAVE BEEN AROUND AND NOT JUST TRY TO PUSH OUT THE SMALLER GUY
TO SAVE A BUCK.
OMG Home depot is making profits? The world is saved!!!
People can't afford quality materials and or a contactor to put them in.
Yeah it's probably the latter.
hard to believe stock keeps going up all they are doing is raising prices, that's why they are making money !
and guess what we the public do have to buy things for our homes, again big business getting us in our pockets.
As far as local business is concerned, more often than not they are ripping of their captive clientele. Before HD moved into our area, the stores were totally gouging their customers. After HD came, those same stores dropped their prices in half. Guess what, they are all still in business.
I build much of my retirement home with HD and their 0% interest for a year credit. Once, when my $3000 whirlpool tub didn't show up after they shipped it, (some trucker got a free upgrade!), they sent me a new one, no questions asked. You can't beat that!
A few years ago you couldn't find an "associate" in an HD store, now, you fart and there is ten of them there to smell it with you. So, give a couple percent of increase due to improved customer service.
As many have pointed out, "pros" really don't use HD for most (not all) products they carry, so my take is that this isn't doing much for building industry recovery, I know I have been in the trade for 30+ years. My guess, home owners and handymen.
@norman pugh: homedeport is owned by the rich.... they came to our town and took out two other lumber yards ,,,screw the rich don.t shop there......
whose role is it to support the local yards? Should HD not set-up shop to save the local yards, or should the local people do their business locally, regardless of HD's existence?
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The company has made at least 4 acquisitions in the space, and few people have paid any attention.
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