Can Home Improvement Catch a Break?

Both Home Depot and Lowe’s this week have posted declining sales and earnings, and the two home-improvement leaders are also cutting back plans this year for new stores. Home Depot is cutting its new stores from earlier expectations of 100 to 35, while Lowe’s cut its units by 20, with 120 new locations in the works.

Executives at both chains don’t seem to see any near-term light at the end of the tunnel, either. Lowe’s is forecasting a 5% to 6% same-store sales decline for the year, while Home Depot executives see a mid-to-high-single-digit comparable decline.

With the housing market in such a decline, this is not surprising. But are there any indicators that these companies’ fortunes could change this year? Also, are there any ways these chains could combat the current market conditions and improve their situations?

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3 Responses to “Can Home Improvement Catch a Break?”


  1. 1 Ed February 27, 2008 at 1:31 pm

    The last time the market got this ugly was late 80’s and early 90’s. Today’s market problems are similar and caused by the same culprit, Banks.
    During the last few years prices went up rapidly not because everyone was making more money but because the banks were giving away too much cheap money.
    Oh well the bubble burst. The cycle starts again.
    Once all the foreclosures are worked through the system banks will start loaning money again, slowly at first and then to keep up with others will loan too much.
    Part of life. Home Depot and Lowe’s will see their fortunes return.

  2. 2 deal junkie February 27, 2008 at 9:26 pm

    The answer is no, not this year.

  3. 3 Clifford Sondock, President of the Land Use Institute February 28, 2008 at 10:31 am

    Ed,

    I have to disagree with your target for blame.

    Banks are not the culprit; banks are in the business of investing capital and profit from the spread…if they are given capital/money, they will invest it…that is what they do.

    If a dog needs to pee and passes a tree or fire hydrant…well…the dog will pee on the tree or fire hydrant, because….that is what dogs do…they pee on trees and fire hydrants.

    The blame is US monetary policy and the creation of too much currency by the Federal Reserve, i.e. Governments without hard currencies backed by gold are tempted to offer voters free services and “do gooder” regulations that Government can’t afford…that is what politicians in democracies do…they offer the public things for “free” to buy votes and, consequently, create inflation…that is what politicians do!

    Excess money produces both bubbles and mal-investment.

    The silver lining is that the Cost of Housing in many markets (unlikely in the Northeast and California) will reach equilibrium and the Cost of Living may subside, provided that the Federal Reserve stops printing more dollars.

    However, if Government keep spending money it doesn’t have…all bets are off and we should all move to Poland and spend our money at Home Depot and Lowes in Poland, where they are discovering free market capitalism!


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