Fitch: Home Improvement Sales Underscore Housing Recovery
NEW YORK -- March 1, 2013
Home improvement retailers The Home Depot Inc. (Home Depot; issuer default
rating of 'A-') and Lowe's Companies, Inc. (Lowes) reported solid 4Q12 results
this week, underscoring Fitch Ratings' view that the housing recovery is in
its early stages, although we note that the recovery will continue to occur in
fits and starts.
Home Depot saw same store sales increase 4.6% in 2012, while Lowe's saw a more
moderate increase of 1.4% as it strives to improve its value proposition and
merchandise differentiation. We project Home Depot and Lowe's will generate
same store sales growth of approximately 2%-4%, which is slightly below our
forecast for 4% growth in total home improvement spending this year. This
reflects, in Fitch's view, a slightly faster growth rate in sales channels
With combined U.S. revenues of $125 billion, Home Depot and Lowe's comprise
less than one-half of the total home improvement market, which is estimated to
be about $280 billion. Both retailers also sell to commercial customers,
although the bulk of their sales are home-improvement related.
The 4.0% growth in home improvement spending projected for 2013 follows an
estimated growth of 4.5% during 2012. Home remodeling spending should continue
to benefit from the improvement in housing turnover this year. We expect
existing home sales to advance 7.7% this year, while new single-family home
sales are forecast to increase 22.0%.
Growth patterns in the intermediate term are likely to be below what the
industry experienced during the previous housing boom and the early part of
the past decade due to slower growth in the U.S. economy and only moderately
improved housing market conditions. Growth in this segment will also be
restrained by tight bank lending standards, which will make it difficult for
homeowners to use credit to finance remodeling projects. As such, we continue
to expect spending for big-ticket remodeling projects that will lag the
overall growth in the home improvement sector.
Additional information is available on www.fitchratings.com.
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