* What: Home Depot, Lowe's first-quarter results
* When: Lowe's on May 17, Home Depot on May 18
* Spring sales strong, but will the momentum last?
* Analysts see room for both stocks to grow
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By Dhanya Skariachan
NEW YORK, May 14 U.S. home improvement chains
Home Depot Inc (HD.N) and Lowe's Cos Inc (LOW.N) are set to
report a strong spring quarter next week, as consumers spruced
up lawns and gardens and sought energy-efficient appliances.
Many homeowners put their renovation plans on ice during
the recession. But in the last few quarters, more have upgraded
appliances to benefit from a federal stimulus for
energy-efficient goods and invested in homes they are likely to
live in for a longer period of time.
Some took up home projects like painting, while many others
bought fertilizer, potting soil and tools to turn over gardens
for the spring. Demand for outdoor furniture and products like
lawn mowers was also strong, analysts said.
That is good news for Lowe's, which is due to report
quarterly earnings on Monday, and Home Depot, scheduled to post
results on Tuesday.
For a graphic comparing Lowe's and Home Depot results,
"The housing sector beginning to come back is part of it,
but again part of it is just the fact that people have been
keeping their powder dry, given their fear about the economy
for over three years," said Craig Johnson, president of retail
consulting firm Customer Growth Partners.
He said both U.S. home improvement chains are poised to
report their best quarter in over three years.
An improving economy is also helping to get U.S. consumers
out of the "repair mode" to "more of a replacement mode," NPD
analyst Mark Delaney told Reuters.
"Spring is all about change, especially when you are coming
off a bad economic downturn. I think everyone has the frame of
mind where they want to improve their lives and ... their
surroundings," he said.
He sees demand for outdoor products like patio furniture
and barbecues continuing even beyond spring, especially as many
U.S. consumers spend holidays at home this year instead of
venturing out for vacations.
While paint and faucets should do "fairly well" in 2010,
categories that might struggle would be more expensive
purchases like cabinetry, often related to larger projects that
involve a contractor, Delaney said.
Lowe's is expected to post a quarterly profit of 31 cents
per shares, down from 32 cents a year ago, while Home Depot is
forecast to see profit rise to 40 cents per share from 35 cents
a year ago, according to Thomson Reuters I/B/E/S.
Thomas Villalta, a portfolio manager at the Jones Villalta
Opportunity Fund in Austin, Texas, which owns Home Depot
shares, said he expects the company to beat both profit and
sales expectations in its seasonally strong first quarter.
HOMEWARD BOUND SPENDING
Recent quarterly reports from lawn and garden products
maker Scotts Miracle-Gro (SMG.N), building products maker Masco
(MAS.N), paint maker Sherwin-Williams (SHW.N), appliance maker
Whirlpool (WHR.N) and Fortune Brands FO.N also point to a
recovery in demand for home goods.
A recent report by NPD Group showed "do-it-yourself" home
improvement categories -- power tools and outdoor power
equipment -- making double-digit dollar sales increases in the
12 months ended March 31.
"Because of the general economy coming back, people who are
among the 83 percent with full-time jobs are focusing on their
homes again," Johnson said.
In February, both Home Depot and Lowe's fueled hopes for a
recovery by indicating that some U.S. customers were warming up
to spend on big-ticket projects such as new flooring and
refurbished kitchens, after a protracted slump in the housing
Analysts say a major pick-up in big-ticket home improvement
sales depends on a further recovery in the U.S. job market and
But investors have already placed their bets on a rebound.
Home Depot shares are up about 21 percent this year, and Lowe's
has risen about 12 percent.
Analysts see more upside for both stocks as the companies
stand to benefit from cost-cutting efforts and any further
improvement in the housing market.
"For more consumers, the home is still where you spend the
majority of your time ... Once people can get past the economic
downturn and how bad it indeed was, I think all the signs are
pointing toward a fairly healthy recovery," Delaney said.
(Reporting by Dhanya Skariachan; editing by John Wallace)