What Home Depot And Lowe’s Fourth Quarter Results Say About The Home Business

2022.03.02

The news from the home front – the home improvement retailing front – continues to be good. Very good.

Not shocking anyone but the fiercest pessimists, the giant twins that rule the DIY sector, Home Depot and Lowe’s, each reported solid numbers this week, finishing up their fiscal years with strong performances that signal any concerns about the overall home products and service sector are simply unwarranted.

Even as supply chain snafus, lumber prices and inflation loom in the background, Americans continued their love affairs with fixing up and redecorating their homes. If they are also getting out of those houses once again to return to offices, travel and be entertained at restaurants and shows, it doesn’t seem to have slowed household spending much if anything.

Nor have home builders slowed up. New home construction, existing home remodels driven by resales and population migrations and just general home repairs from independent contractors also played their part in driving sales over the past year, both companies said.

The numbers from these big retailers prove the point:

• Home Depot sales up 11% in the fourth quarter and 14% for the year. Same store sales up 8.1% for the quarter and big-ticket transactions – more than $1,000 and generally considered indicative of the builder sector – increased 18%. Net income for that fourth quarter hit $3.21 per share, versus $2.65 per share a year ago. All of those numbers beat analyst expectations, often by substantial margins.

• Lowe’s did almost as good, reversing recent results where it has outperformed many of Depot’s numbers. Sales for the quarter were up 4.8% with same store numbers up 5% and sales to the building pro market up 23%.  Net income per share was $1.78 versus $1.32 last year. And as with Depot, those results beat the analyst’s forecasts nicely.

These results come even as both retailers continue to project positive stories for 2022. Home Depot said it expects earnings per share will grow at a low single digits pace with overall sales being “slightly positive” for this new fiscal year. The Lowe’s forecast was similar, upping its bottom-line projection and signaling sales would be plus or minus 1%.

Those sales forecasts do seem to indicate a slowing of home improvement business but more profitable ones for these retailers who expect to see some relief on supply chain and overhead costs. Still there is little here that sends up red flags for the entire home goods and services sector.

The key factor in the optimism is the overall strength of the housing market, Lowe’s CEO Marvin Ellison told CNBC this morning. “When home prices go up, consumers have confidence to invest in their homes.”

Home prices over the past year in major metropolitan areas have skyrocketed 18.8%, according to the S&P CoreLogic Case-Shiller National Home Price Index. It’s the biggest increase since the index began in 1987.