Nov. 24 (Bloomberg) -- Home Depot Inc. and Lowe’s Cos., the largest U.S. home-improvement chains, are stocking fewer fake Christmas trees as shoppers plan to save money by buying the real thing.

“As the economy has gotten tougher, artificial trees have become more of a discretionary purchase,” Craig Menear, Home Depot’s executive vice president of merchandising, said in an interview at a store in Atlanta, its home base.

The retailer will stock the same number of cut trees as last year and a smaller percentage of factory-made, Menear, 52, said. Lowe’s will carry about the same number of cut trees as last year and 10 percent fewer fakes, Chief Executive Officer Robert Niblock, 47, said. Neither company would disclose their proportion of real trees to artificial.

Shoppers seem ready to trade the long-term benefit of a reusable fake tree for the short-term savings of a cut tree, which typically costs less. Artificial trees at Home Depot are $79.97 to $269; cut trees are $9.97 to $100. Lowe’s sells fake trees for $38 to $298, which is $100 less than the highest- price fake last year. Its live trees cost $15.97 to $178.

Declining demand for faux firs mirrors a spending shift throughout both chains and across the U.S. Shoppers are moving away from discretionary purchases, especially the priciest ones. The value of average purchases fell in the third quarter, sinking 7.1 percent to $51.89 at Home Depot and 6.7 percent to $61.43 at Lowe’s.

New Spending Pattern

“The discretionary side of our business has taken a hit,” Menear said.

Home Depot is tapping this spending pattern in the home improvement category by selling a primer-paint combination for as little as $30 a gallon, $10 to $15 less than the cost of primer and paint bought separately, said Gordon Erickson, a senior vice president of merchandising. At Lowe’s, holiday demand for decorations and electrical cords may push down average purchases in the fourth quarter, Larry Stone, president and chief operating officer, told analysts Nov. 16.

Large purchases won’t rebound until U.S. unemployment peaks and housing prices stop falling, probably in the second half of 2010, Niblock said on the conference call.

Home Depot rose 5 cents to $27.56 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have advanced 20 percent this year, after declining the previous four years. Lowe’s jumped 13 cents to $22.01. The shares increased 2.3 percent this year.

Managing Inventories

The new frugality is spurring a change in strategy among retailers such as Home Depot, which cut inventories by 8.9 percent in the third quarter. Lowe’s, after reducing older stores’ inventories 4.1 percent in the three months ended Oct. 30, bought “conservatively” for the holidays, COO Stone said.

Retailers’ goal is to emerge from the holidays without leftover merchandise they must discount, said Robin Diedrich, an Edward Jones and Co. analyst in Des Peres, Missouri. She recommends buying shares of Home Depot and Lowe’s.

“In general, we’re going to see lower levels of inventory across the board, whether it’s seasonal items or regular merchandise,” Diedrich said by telephone Nov. 17.

So far, Home Depot’s sales of holiday items are “meeting our expectations” in terms of inventory levels, Carol Tome, 52, chief financial officer, said. “We believe we won’t have any markdowns at the end of the season.”

Lowe’s told analysts that it bought too many holiday decorations last year, making price cuts necessary. This year, besides pruning its artificial tree order, the company has lowered its top fake tree price of $100 and is stocking more inexpensive models, which usually come without lights.

“We tried to respond to that consumer out there who needs a new tree, but tries to stay within a restricted budget,” Niblock said in an interview.

To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net.

Last Updated: November 24, 2009 16:43 EST