HOME DEPOT – STRONG SHOWING IN A STRONG ECONOMY

Home Depot’s second quarter results were well-received, sending the stock sharply higher.

There’s been a lot of media effort recently that’s been put into trying to convince anyone willing to listen that a recession is sure to be in the offing.  It boggles the mind that anyone wouldn’t be able to look at the numbers – strongest economy in 50 years; lowest unemployment rates for all groups – ever;  strong manufacturing rates; strong trade advances, etc etc – and not see that it would take a lot to turn the current situation into a recession.  But those who would like to make a recession a reality claim that “30% of economists think there will be a recession” – which means that 70% don’t – right!  So, Home Depot comes along with their results at just the right time, with earnings of $3.17/share.  The company also now says that it expects 4% same-store-sales growth (down from the earlier 5% forecast) due to the lower lumber costs this year.  Investors had had low expectations for Home Depot’s ability to weather a weak housing market.  But the company seems far less tied to home sales than it was prior to the housing bust.  According to a WSJ article on the topic, this seems to be driven in large part by homeowners’ decision to invest in the house they already have rather than in trying to buy a new one.   It is also reflective of the age of current homes in the U.S., where in 2016, the median age of owner-occupied homes was 37 years.  It seems that those analysts and investors whose fears were stoked by worries that Home Depot might not be able to do so well in a less-than-buoyant housing market, might have taken that fact into account – the regular upkeep on aging homes in order to insure that they maintain their value is a strong source of income for Home Depot.  In addition to these factors, Home Depot is also benefitting from the bankruptcy filing and decline of Sears, whose sales of appliances and tools was once a strong competitor for Home Depot.  In addition, another competitor, Lowe’s, has begun paring back stores as a part of its turnaround plan.  All of these situations, it would seem, would have been factored in to execrations of how Home Depot wold fare in the current environment.  And, even better, Home Depot spokesmen say that the company’s real-time figures haven’t registered any tariff effects – the tariffs complaint has also been a steady drum beat of those who have been hoping they would effect the economy, to pull it down.  So, all-in-all, very good news from Home Depot.  And for those who haven’t visited a local store recently, the company is also putting a lot of effort into having staff available at all times to assist customers.

ALL THE MOVING PARTS – working together.

Leave a Reply