What Do the New Home Depot and Lowe’s Results Mean for the Building Business?

The new financial results from the two big home improvement chains show both the pro and do-it-yourself building sectors have slowed down…but it’s not all bad news.

If the building industry needed any more proof of the slowdown in the construction sector they didn’t have to look any further than the new first-quarter financial results released in the past two weeks from the big doppelganger chains, Home Depot and Lowe’s.

Both showed declines in their top-line revenues – for Home Depot, a first in ten years – as well as drops in same-store sales. Bottom line profits weren’t so great either. Worth noting is that both retailers beat the analyst estimates on profitability, indicating they are managing the downturn well. Lowe’s even beat the forecasts on total sales, though Home Depot missed and for Lowe’s, the results beat their cross-town rival for the first time in nearly three years.

So, what does it all mean? Even as each retailer took down its overall outlook for both top and bottom lines for the year, the stock market did not punish either to any great degree indicating a generally optimistic look ahead.

The good news for the building trade is that Home Depot said its building materials business continues to remain strong even as other areas, such as kitchens and flooring, have slowed. “The state of the homeowner is that they’re very healthy,” chief financial officer Richard McPhail told CNBC. “They have healthy balance sheets. They have healthy incomes. But I do think — and our professional customers tell us they hear this from their customers — there is that shift, even if it’s temporary from larger projects into smaller ones.”

At Lowe’s, CEO Marvin Ellison pointed to positive comps in their pro-business but blamed lower lumber prices for some of the quarter’s sales decline. “We remain optimistic about the medium to long-term outlook for home improvement,” he said.

So what’s the big takeaway? Things have slowed for the time being but the two DIY giants say it’s not that bad and it’s going to get better sooner rather than later.

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