The stocks of two home improvement giants, Lowe’s and Home Depot, have skyrocketed by nearly 20% this year. For analysts, the trend is set to continue, as homeowners gear up for a season full of sprucing up and home additions.
A Sign of Resilience
Despite different setbacks in the past 11 months, Home Depot and Lowe’s remain resilient. Analysts find it impressive that these two brands stay on top at a time when retail companies start to lose footing in the global economy.
Telsey Advisory Group analyst Joe Feldman compares the situation with Macy’s, which had just lowered its profit outlook for the year’s last quarter. This goes on top of the unimpressive growth of the S&P Retail Select Industry Index, which has gone up by a measly 2%. In line with this, Feldman called it “safe” to invest in the two home improvement companies – at least for now.
The Driving Forces
Experts see three main driving forces behind the continuing success and resilience of the two major brands. The first reason is the number of home improvement projects that homeowners undertook this year. With fairly high numbers, it is no wonder how these companies stay competitive.
The real estate market is the second reason. According to realtors, houses sell at a faster pace for the year than what the market was like in 2013. In effect, more homeowners push for different home improvement projects to improve a property’s value. In the end, both Home Depot and Lowe’s benefit from the demand for materials and tools for renovations, additions, and other projects.
Lastly, analysts see Home Depot’s attitude towards the issues it faced this year as a contributing factor to its stellar performance. Despite the massive data hack attacks on Home Depot and Target, the former was the only one to shrug it off.
Up until now, Target remains in a tough spot with weaker sales and poor stock performance. Home Depot, on the other hand, has gotten back on track and pulled off an impressive performance amidst this share-depreciating issue.
Studies from different sources, however, indicate that home improvement could hit a few rocks along the way by 2015.
A study from Harvard University’s Joint Center for Housing Studies predicts that the home remodeling industry will slow down in the next year. With moderating growth, demand would be tougher to come by for the two brands.
Another analysis from BuildZoom suggests the skyrocketing prices of house rents push homeowners to spend less on remodeling and renovation projects.