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March 1 - Home improvement retailers The Home Depot Inc. (Home Depot; issuer default rating of 'A-') and Lowe's Companies, Inc. (Lowes) reported solid 4Q12 results this week, underscoring Fitch Ratings' view that the housing recovery is in its early stages, although we note that the recovery will continue to occur in fits and starts. Home Depot saw same store sales increase 4.6% in 2012, while Lowe's saw a more moderate increase of 1.4% as it strives to improve its value proposition and merchandise differentiation. We project Home Depot and Lowe's will generate same store sales growth of approximately 2%-4%, which is slightly below our forecast for 4% growth in total home improvement spending this year. This reflects, in Fitch's view, a slightly faster growth rate in sales channels serving professionals. With combined U.S. revenues of $125 billion, Home Depot and Lowe's comprise less than one-half of the total home improvement market, which is estimated to be about $280 billion. Both retailers also sell to commercial customers, although the bulk of their sales are home-improvement related. The 4.0% growth in home improvement spending projected for 2013 follows an estimated growth of 4.5% during 2012. Home remodeling spending should continue to benefit from the improvement in housing turnover this year. We expect existing home sales to advance 7.7% this year, while new single-family home sales are forecast to increase 22.0%. Growth patterns in the intermediate term are likely to be below what the industry experienced during the previous housing boom and the early part of the past decade due to slower growth in the U.S. economy and only moderately improved housing market conditions. Growth in this segment will also be restrained by tight bank lending standards, which will make it difficult for homeowners to use credit to finance remodeling projects. As such, we continue to expect spending for big-ticket remodeling projects that will lag the overall growth in the home improvement sector.