I'm either in serious denial or big-box hardware retailers Home Depot
Yes, the new-housing market roared these past few years, and it's been slowing down of late. But "slow down" is not the same as "dead stop," and I still believe that these retailers sell plenty of equipment that shouldn't be so inextricably linked to new-building activity.
Lowe's had what looks like a good quarter to me, but -- not helping matters -- it wasn't an absolute smash. Sales were up more than 20% (boosted by a shift in the financial calendar) and comp-store sales were up 5.7%. That's not a number that would embarrass most retailers, but it was the lowest in a few quarters -- the lowest, actually, since last year's first quarter, when results were hurt by unseasonable weather. Margins improved a bit, net income was up more than 43%, and the company was cash flow-positive -- nothing particularly startling there.
Guidance and the perception of housing market risk are almost certainly going to be the major talking points. Management is looking for comp-store growth of 4% to 5% for the full year, and that's clearly not the level of growth some investors have become accustomed to. And so, despite considerable organic growth potential across the United States and Canada, the present market and its shoot-first mentality will focus on the company's more newsworthy risk factors.
I continue to view Home Depot and Lowe's as the value and growth plays, respectively, of the consumer hardware market. Home Depot has its new efforts in consumer services and commercial supply, while Lowe's has regular ol' store expansion in its plans. And at the risk of sounding like a broken record, even if new-housing construction slows down, I don't think it automatically follows that renovation and regular upkeep/maintenance will simply go away.
It's almost by reflex that I generally prefer Home Depot, but the gap between Home Depot and Lowe's has been shrinking. I have about as much retail exposure as I want in my portfolio today, but investors willing to ignore today's press clippings and hold for better returns down the road might just want to look at these shares.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). The Fool has a disclosure policy.
