August 15, 2012 in Business

Americans spending on home projects

Associated Press
 

ATLANTA – The Home Depot Inc. is feeling more optimistic about the recovery of the housing market after customers spent more on sprucing up their homes in the second quarter.

The country’s biggest home-improvement retailer said Tuesday that strong cost controls and healthy sales of paint, bathroom accessories and kitchen installations helped lift its net income by 12 percent during the period.

In a conference call with investors, Chairman and CEO Frank Blake noted that some of the strongest growth in the latest quarter came from the markets that were hit hardest in the downturn, such as California and Florida.

“These are encouraging signs of stabilization in the housing market,” Blake said.

He also noted that the housing market is now a contributor to the country’s gross domestic product, rather than a drag.

Still, the housing market is still a long way from returning to its heyday before the recession. Home Depot’s net sales in the quarter rose just 2 percent from a year ago and came in short of Wall Street expectations. And although the company lifted its earnings-per-share forecast, it didn’t update its outlook that sales for the year would grow by 4.6 percent.

When the housing market is weak, companies such as Home Depot struggle because new construction slows and contractors don’t spend as much on supplies. Homeowners also pull back on projects, such as kitchen or bathroom renovations.

Brian Sozzi, chief equities analyst with NBG Productions, noted that the improvement in sales of bigger-ticket items suggests consumers are opening up to the possibility of larger projects, such as redoing their cabinets. They’re also spending on other items.

“People are buying lawn mowers and other items they weren’t necessarily buying in 2010 or 2011, when they just didn’t want to put that on their credit cards,” he said.

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