Many members of the media have pored over Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) latest quarterly reports, eager to glean glimmers of hope for the housing market. Alas, if there are any such signs in these retailers' numbers, they look pretty darn dim.
Home Depot's third-quarter earnings revealed a variety of downward trajectories. Net income fell 8.9% to $689 million, or $0.41 per share. Revenue dropped 8% to $16.4 billion. Same-store sales fell 6.9% overall, and 7.1% in U.S. stores.
Lowe's third quarter displayed similar disappointments. Net income plunged 29.5% to $344 million, or $0.23 per share. Sales slid 3% to $11.4 billion, and same-store sales dropped 7.5%.
The companies have been able to bolster margins by cutting costs, but that approach can only take them so far. Both Lowe's and Home Depot need to increase sales to lay the foundation for a true recovery.
I'm glad that Lowe's CEO talked about signs of sequential improvement in hard-hit areas like California, Florida, and other areas in the Southwest. On a similarly promising note, Home Depot's head honcho also observed that the percentage of domestic GDP devoted to private fixed residential investment had flattened out, ending its decline.
On the other hand, business from professional customers still lags that of casual do-it-yourselfers in Home Depot stores. Clearly, that's a major bummer for anyone eager to see the retailer build up a higher rate of growth anytime soon.
Lackluster earnings aren't the only glum news for these companies. As the government announced today, mortgage delinquencies continue to hit record highs; the tarnished silver lining there, I guess, is that the pace of delinquencies' growth has been slowing. Still, ample reasons remain for investors to fear the housing market.
Home Depot tentatively called a bottom to housing's woes back in June, but that prediction clearly hasn't panned out yet. For now, retailers and restaurants like Wal-Mart Stores (NYSE:WMT), Costco (NASDAQ:COST) -- which abandoned a home improvement retail experiment last spring -- and McDonald's (NYSE:MCD) might be much safer homes for investors' money than Home Depot or Lowe's.
