The industry’s two largest home-improvement retailers have something to build upon this year after each reported strong sales and profit gains in the last three months of its fiscal 2011.

And while The Home Depot and Lowe’s Cos. generate only a relatively small part of their overall business from home-building contractors, their late-year surges were seen by industry watchers as another positive sign of a recovering housing market.

Fiscal 2011 Financial Performance
Lowe’s The Home Depot
Revenue $50.21 billion $70.395 billion
% Chg. 2.9% 3.5%
Net Income $1.84 billion $3.89 billion
% Chg. (8.5%) 16.3%
Store Count 1,745 units 2,252
Sales Gain 0% 3.4%

On Monday, North Carolina-based Lowe’s reported an 11% increase in revenue and a 13% increase in net income for the quarter ended February 3. Atlanta-based Home Depot’s sales gain for the quarter ended January 29 was more modest, 5.6%, but its net income for those three months soared by 31.6%. “We had a strong finish to 2011, and with favorable weather, our business delivered results that exceeded our expectations,” said Frank Blake, chairman and CEO, in a prepared statement.

Depot’s full-year earnings, in fact, outpaced Lowe’s (see chart below), which last fall announced that it was closing 20 under-producing stores and laying off 2,000 employees to bolster its balance sheet. On a store-by-store basis, Home Depot last year outpaced Lowe's in sales by $2.5 million per unit, and by $700,000 per unit in profit.

Still, Lowe’s CEO Robert Niblock said that he was encouraged by his company’s “progress” last year, during which its comparable store sales were positive in all regions of the U.S. as well as in 13 of the 16 product categories.

Both retailers are projecting modest sales growth in 2012, and double-digit earnings-per-share gains. Depot plans to open 11 stores in 2012, during which its capital spending should hit $1.325 billion. Lowe’s, which last October enhanced its stores’ point-of-sale capabilities by arming employees with 42,000 customized iPhone 4s, increased its capital expenditures in 2011 by 20% to $1.6 billion. The company intends to open 10 stores in 2012.

John Caulfield is senior editor for Builder magazine.

Learn more about markets featured in this article: Atlanta, GA.