Home Depot results may signal some improvement

Lowe's said Monday its profit plunged 30% but that it has seen improvement in some of its worst hit markets including California, Florida and areas of the Southwest. See full story on Lowe's results.

That bodes well for Atlanta-based Home Depot, analysts said, because those regions represent a bigger percentage of the company's business. Credit Suisse analyst Gary Balter estimated that the regions represent 17% for Lowe's and 25% for Home Depot.
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Home Depot's shares were up 0.6% while Lowe's shares were down about 1%.

Lowe's other comments about consumer spending and consumers' perception that the value of homes has showed some stabilization also may indicate similar positive sentiment from Home Depot, analysts said.

While consumers continued to curtail buying of orders above $500, executives at the Mooresville, N.C.-based Lowe's said buyers are gradually feeling more comfortable about larger ticket purchases with flooring, kitchen and bathroom remodels ranking at the top of the list of their delayed home-improvement projects.

"There's a lot of work that people have been postponing," said Bill Smead of Smead Capital Management, a Home Depot shareholder. "Home Depot will be a beneficiary."

Home Depot said in August that it had seen some positive signs, including the retailer's first positive comparable transactions in the United States for the first time in more than five years, as well as its biggest gain in total market share in five years.

To be sure, while Home Depot is expected to echo some positive sentiment, its overall results aren't expected to look too pretty just yet.

Analysts estimated the Atlanta-based company is expected to report profit likely declined to 36 cents a share from 45 cents a share, according to FactSet Research.

Other data also suggested the sector continued to be among the worst hit. The Commerce Department reported better-than-expected October retail sales on Monday, with home-goods related segments including furniture and home-improvement still posting declines even as general-merchandise and apparel stores saw gains.



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