The industry's two largest home improvement retailers, The Home Depot and Lowe's, this morning and yesterday reported far weaker sales and profit for fiscal 2007, which each company attributes primarily to the ongoing downturn on home buyer demand.
For the first time in its 30-year history, Atlanta-based Home Depot reported a sales decline for a full year. In the 12 months ended Feb. 3, 2008, the company's revenue was off 2.1 percent to $77.349 billion. The retailer's comp-store sales (sales from stores that have been open for more than a year) for the year fell 6.7 percent, and its net income plummeted by 23.7 percent to $4.395 billion. Depot's fourth quarter was particularly tough; during that period its earnings fell 27.5 percent to $671 million, on sales that rose by 1.5 percent to $17.659 billion.
Lowe's, which is based in Mooresville, N.C., managed a 2.9 percent gain in sales, to $48.283 billion, for its fiscal year, which ended Feb. 1. But its comp-store sales were off 5.1 percent and its earnings dropped 9.5 percent, to $2.809 billion. The company's CEO, Robert Niblock, pointed to "an unprecedented decline in housing turnover, falling home prices in many areas and turbulent mortgage markets that impacted both sentiment related to home improvement purchases as well as consumers' access to capital," for his company's lackluster financial performance. The Financial Times quoted Larry Stone, Lowe's COO, as saying that in his 38 years of retailing "I can only recall one time--in the mid-1970s--when we have experienced so many headwinds." Niblock added, though, that he expects 2009 to be better than 2008.
Both retailers continued to open new stores last year, and plan to do the same in 2008. Lowe's--which opened 153 stores last year, ending fiscal 2007 with 1,534 stores and making its first move into Canada--intends to open another 120 units in a year when it expects its sales to increase marginally and its comp-store sales to be off by 5 to 7 percent. Home Depot, which ended last year with 2,234 stores, will open another 55 and relocate five others. However, the company expects its sales in 2008 to be down 4 to 5 percent, to report negative comps, and to see "flat to slightly positive" gross margin expansion.
"We see the home improvement market in 2008 as challenging, but we are going to continue to focus on our five priorities and build on the progress we made in 2007," said Depot's CEO Frank Blake. One of those priorities is upgrading its stores and personnel, and Depot is budgeted to spend $2.3 billion on capital improvements this year.
Depot's biggest challenge, though, continues to be getting more people into its stores and spending more money. For the year, its customer transactions inched up 0.5 percent, but what an average customer spent was off 2.4 percent to $57.48. More to the point, its stores' weekly sales average was down 9 percent to $658,000 per unit.