PREVIEW-US home improvement chains to post weaker results

ATLANTA Feb 22 (Reuters) - Home improvement retailers are expected to post weaker results and probably won't see a rebound at least until 2009 as the U.S. housing slump, concerns about recession and tighter credit conditions stall consumer spending.

Home Depot Inc (HD.N), Lowe's Cos (LOW.N) and Sears Holdings Corp (SHLD.O) are all set to report fourth-quarter earnings next week.

"Investors expect a fairly dismal near-term environment and are generally anticipating recovery to come no earlier than 2009," Sanford Bernstein analyst Colin McGranahan, who follows Lowe's and Home Depot, said in a Thursday research note.

While falling home sales and construction have been a major hit to results over the past year, these retailers have also been hurt as consumers aware of falling home prices pulled back from big-ticket projects such as kitchen remodeling.

"A large part of renovation is to set it up to improve the value of the property," Doug Kass, head of the bearish hedge fund Seabreeze Partners Management, told the Reuters Housing Summit in New York this week.

"And now, given the erosion in (home) values, it seems it's not all that necessary," he added.

Kass said many people don't realize that buyers who refinanced their homes and took cash out to fund improvements or trade up to higher-end goods no longer have that luxury.

"If you look at the retailing industry, there was a huge amount of upscaling in purchases where low- and middle-income consumers upgraded their purchases as they used their house," Kass said. "Things are going in reverse now."

That spending scale-back has affected key suppliers of Home Depot, Lowe's and Sears Holdings, many of which expect little or no sales gains in 2008. LOOKING FOR BOTTOM

Masco Corp (MAS.N), which sells paint, cabinets and faucets, said earlier this month that consumers aren't likely to invest more money in their homes until they sense the housing market has hit bottom.

"There's been a dramatic deterioration in consumer confidence in the value of their homes with the decline in selling prices," Masco Executive Chairman Richard Manoogian said during a conference call.

Masco forecast that its profit could fall to 85 cents a share this year as sales decline from the year ago. The company said housing starts could drop as much as 33 percent this year, on top of a 25 percent decline for last year.

Tool maker Stanley Works (SWK.N) has cited the possibility for a "mild and short-lived U.S. recession" this year, and appliance maker Whirlpool Corp (WHR.N) is expecting 2008 U.S. appliance shipments to fall 3 percent to 5 percent.

For Home Depot, analysts expect fourth-quarter profit of 43 cents a share, down from 50 cents a year earlier, according to Reuters Estimates. Quarterly profit at Lowe's is expected to be 25 cents a share, down from 40 cents a year ago.

Daniel Binder, a Jefferies & Co. analyst, said in a note that margins at Home Depot and Lowe's may be pressured by lower credit income, and added that Atlanta-based Home Depot could cut store growth.

Sears, which operates the Kmart and Sears, Roebuck chains, warned in mid-January that fourth-period earnings could be less than half that of a year ago. Analysts expect $3.10 a share, down from $5.36 a year earlier, according to Reuters Estimates.

Lowe's reports results on Monday, followed by Home Depot on Tuesday and Sears Holdings on Thursday.

Home Depot shares were off 36 cents, or 1.3 percent, to $27.03 in afternoon trading on the New York Stock Exchange on Friday, while Lowe's was down 12 cents at $23.11. Sears was down $1, or 1 percent, to $95 on Nasdaq.

Home Depot's stock has fallen 34 percent in the past year, compared with a 31 percent drop for Lowe's and 50 percent slide for Sears. (Reporting by Karen Jacobs in Atlanta, with additional reporting by Patrick Fitzgibbons in New York; Editing by Dave Zimmerman)