Home Improvement Projects Stall as Consumers Await Bottom
The country’s two largest home improvement stores had lower profits in the Q209 than they did in Q208, and said they are reevaluating strategies to face shaky consumer confidence. Mooresville, NC-based Lowe’s (LOW) earned $759m ($0.51 per share) in the quarter, down 19.1% from Q208. CEO Robert Niblock said the decline from 2008 was due in part to increased spending spurred by the financial stimulus package last year, along with unseasonable weather this year in core markets. “Cautious consumers remain reluctant to take on discretionary projects until signs of economic improvement are more evident,” he said, calling the Q209 results lower than expected, but “reasonable.” However, Niblock said changes in consumer mindsets could lead the company to improved profits. “There are some indications that a bottoming process in housing and the broader economy is under way, and we have seen customer traffic levels stabilize as we benefit from the resurgence of a do-it-yourself home improvement mindset,” Niblock said. Atlanta-based The Home Depot (HD) earned $1.1bn in the quarter ($0.66 per share), compared $1.2bn in Q208. The results were improved with a $50m benefit from what the company called a “favorable foreign tax settlement.” “Concerns about the housing market, rising unemployment and softness in the overall economy continue to pressure consumers," Home Depot chairman and CEO Frank Blake said in a statement. Both companies are changing strategies to evolve in the current market. Home Depot completed the closure of its Expo chain of stores that focused on upscale interior design and sold luxury home improvement products this quarter. Home Depot said it expects 2009 sales will be down 9% from 2008. Lowe’s expects 2009 sales will be down 3% from last year and said it is reevaluating its future store expansions. It opened 18 new stores in Q209, and plans to open 11 more in Q309. Lowe’s said its reduced expected expansion plans for 2010 and will only open 35 to 45 stores. Earlier this month, the company announced it would not renew its multi-million dollar contract for the naming rights to the NASCAR racetrack located outside Charlotte, NC, as it looks to reduce marketing expenses. Write to Austin Kilgore.