Spring is usually the best time of the year for home-improvement retailers Home Depot Inc. and Lowe's Cos., and this spring their sales finally appear to be blooming after three years of withering trends.
Favorable weather in much of the U.S. has do-it-yourselfers once again spending on seasonal items like flowers and mulch. There are also signs that, unlike last year, the chains are benefiting from sales to contractors and increased buying of bigger-ticket items.
"Spring is our Christmas season," Craig Menear, Home Depot's executive vice president of merchandising, said last month. "We're very pleased with how that's started."
Combined, Home Depot and Lowe's hold about 67% of the U.S home-improvement retail market, according to research firm IBISWorld. Both companies, which report first-quarter results in mid-May, declined to comment for this article. But reports from others in the home-improvement industry paint a picture of consumer spending picking up as the weather has improved.
The "first quarter of 2010 got off to a pretty rough start," Sherwin-Williams Co. Chief Executive Christopher Connor said last week]. "Then in March the storm clouds parted, literally and figuratively, and the pace of business began to improve."
Paint, Lowe's second-largest product category last year, had already been selling better than other products because painting is an easy, relatively low-cost do-it-yourself project. But Sherwin-Williams noted a pickup this spring in its business to contractors, indicating that some do-it-for-me customers and landlords are also starting to tackle projects again.
Contractors, which have generated about a fourth of the retailers' sales historically, are key to helping to improve the average sales receipt, a major driver of profitability.
And unlike a year ago, consumers seem more willing to buy bigger ticket items. Farm-equipment retailer Tractor Supply last week raised its forecast for outdoor power- equipment sales after strong unit sales of riding lawn mowers.
Meanwhile, heating and air-conditioning product distributor Watsco Inc. said that sales of higher-efficiency systems grew 63% in the first quarter, and its chief executive projected "terrific earnings growth for the remainder of 2010" if April sales-growth trends continue.
The turnaround in home-improvement sales appears to have started in March. Even after adjusting for seasonal variation, March sales at building-material, garden-equipment and supply stores outpaced the overall retail average, the U.S. Census Bureau reported recently. The category's 3.1% improvement between February and March was the biggest increase since November 2007, according to Rochdale Securities.
The recent spending bump could be credited to increased consumer confidence, tax refunds and appliance rebate programs. The stock market's recovery is also helping.
That's what got Mel and Sandy Hyder of Huntersville, N.C., started on a whole-house renovation they had put on hold in November 2008. Mr. Hyder is retired, and for a while he was afraid "his whole pension was going to disappear," Mrs. Hyder said during a recent shopping trip to Lowe's for medicine cabinets and plumbing fixtures.
Now, with the market recovering and his pension in place, it is time to focus on the house. "We're not getting any younger," she said.
Also helping are moves by Lowe's and Home Depot to boost sales through more targeted marketing of in-home estimates for big projects, federal tax credits and manufacturer rebates.
Home Depot has said it expects sales at stores open more than a year to increase 2.5% this year, while Lowe's expects its full-year increase to range from 1% to 3%.
Harvard University researchers suggest spending on remodeling could rebound faster than was forecast in January. Harvard's Joint Center for Housing Studies says spending could be tracking at an annualized rate of $121.5 billion by the fourth quarter, or 4.9% above the $115.8 billion spent in 2009. That would end three years of declines and follow a 3.6% drop in spending during 2009, according to the center.
"It looks like we've really turned the corner," said Kermit Baker, a spokesman for Harvard's Joint Center for Housing Studies.
Investors are sensing a rebound. Shares of Home Depot, a component of the Dow Jones Industrial Average, are up 23% for the year to date, while Lowe's shares have gained 17.7%, both double the pace of the broader market.
Still, not everyone is seeing an increase in spending. Don Randazzo, a contractor who builds outdoor kitchens in the Charlotte, N.C., area, said his business is actually slower than a year ago.
People "are calling for estimates, but they're not following up," Mr. Randazzo said. "They don't call you back because they don't have the money." His carpenter, Stephen Clayton, added, "Work nowadays is more along the lines of people fixing things that have been broken and will cause more damage if they don't fix them."