Home-improvement retailers delivered a mixed bag of data in their most recent quarterly results. Although some of the information seems heartening, a rebound for all retailers remains no sure thing.
However, Home Depot's net sales decreased 0.3%, to $14.6 billion, and U.S. comps fell 1.1% in a weak domestic market. In perhaps the report's most positive sign, total same-store sales did increase by 1.2%.
Yesterday, archrival Lowe's
Both retailers' earnings suggest that the worst of the economic crisis is behind us and that consumers are tentatively venturing back to do-it-yourself home improvements. Home Depot bumped up its dividend by 5%, while Lowe's authorized the repurchase of as much as $5 billion in shares.
That's all seemingly good news -- but today's reported plunge in February's consumer confidence suggests grimmer possibilities lurking underneath. Continued high unemployment and an inventory-bloated housing market could join forces to huff and puff and blow home-improvement retailers' future earnings down.
Just last week, even the mighty Wal-Mart
Sure, folks will always want to occasionally upgrade their surroundings, but the days of mass adoption of gratuitous granite countertops and Berber carpets are probably behind us. Costco's
To size up these retail rivals, Wal-Mart's trading at 13 times forward earnings. Lowe's has a forward price-to-earnings ratio of 14, and Home Depot looks the priciest at 18. Those prices seem just too steep, given the challenges facing a sustainable turnaround in the home-improvement niche. Investors should think twice before buying these stocks now.
Costco, Home Depot, Lowe's, and Wal-Mart are Motley Fool Inside Value choices. Costco is a Stock Advisor recommendation. The Fool owns shares of Costco. Try any of our Foolish newsletters today, free for 30 days.