While we all know that the economy is hurting right now, apparently the outlook has just become bleaker for the home improvement market. Colin McGranahan, an analyst at Bernstein Research in New York, has downgraded home goods-related stocks, including Home Depot, Lowe’s and Williams-Sonoma. During the downturn, the stocks have been outperforming their competitors as people are looking more toward DIY and fixing rather than remodeling. When the economy improves (which apparently McGranahan thinks is on the horizon), these stocks might suffer. He downgraded them from “outperform” to “market weight.”
Home Depot’s stock dropped 57 cents (down to $24.93) after the report. While this move is obviously a reaction based on the report, the question remains if the prediction will hold true. Remember, only a month ago the same analyst upgraded the stock to “outperform” raising HD’s stock target price from $27 to $29 and Lowe’s from to $25 to $27. Ironically, the HD stock dropped after this announcement. This sounds to us more like the analyst is just as unsure about the future as the rest of us or is correcting for prediction he made that isn’t (yet) coming true. Regardless, predicting that, “History would strongly suggest that the window for buying ‘retail’ en masse is closing,” seems a bit premature. Not everyone is comfortable buying online or at discount outlets with little to no customer service (not to imply that HD or Lowe’s are all that much better) and limited selection.
One thing is for certain – no one can predict the future, and home improvement warehouses are still the place to go to instantly purchase tools, lumber and home accessories without having to worry about (added) shipping costs.
