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Home Improvement Is Going Strong

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What's going on?

The past few days have seen home improvement giants Home Depot and Lowe’s both report earnings – and their results were pretty good.

What does this mean?

While some retailers have struggled (like department stores), home improvement companies have experienced significant sales growth: Home Depot’s US sales rose almost 9% versus a year ago (Lowe’s rose 5.5%). One of the biggest reasons these retailers are doing well is because home prices keep going up. When your home goes up in value, you become more likely to “invest” in it by redoing the kitchen or replacing the roof.

Why should I care?

For the stocks: Home Depot always seems to do a bit better than Lowe’s. A good example is the growth in sales mentioned above (8.9% for Home Depot vs 5.5% for Lowe’s). Consequently, Home Depot’s stock is valued slightly higher (technically speaking, its stock price is worth more versus its underlying profits than Lowe’s stock price is). In general, though, their fortunes are pretty closely tied together by things like house prices, consumer spending and a possible new competitor…

The bigger picture: Amazon hasn’t penetrated the home improvement space (yet).  You can actually buy most DIY supplies from Amazon (even things like laminate and a kitchen sink), but people tend to use Lowe’s and Home Depot for projects. You can’t ask an Amazon sales rep for advice on how to redo your kitchen. However, Amazon is surely a risk: Amazon Home Services, which connects consumers with service professionals in their area, is expanding quickly. So you can buy that sink from Amazon and schedule a plumber to install it upon delivery. Look out Home Depot (and Lowe’s)!

Originally posted as part of the Finimize daily email.

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