Lowe’s, Home Depot a bright spot right now in retail

CHARLOTTE, N.C. – After a week of dismal earnings from department stores, home improvement companies are proving to be the silver lining of the retail industry. Both Home Depot and Lowe’s reported better-than-expected financial results this week as they enter what they consider their own Christmastime – the spring season.

Lowe’s, the second-biggest home improvement retailer in the U.S., and Home Depot are benefiting from a warmer-than-expected winter and continued strengthening in the U.S. housing market at a time when traditional retailers struggle against e-commerce and changing consumer preferences.

“Home improvement retail is very much a bright spot in an otherwise weakish consumer environment. Clearly shoppers are choosing to shop the home improvement channel as versus other areas of retail,” Brian Nagel, senior equity research analyst at Oppenheimer & Co., said on CNBC’s SquawkBox Wednesday morning.

Lowe’s, based outside Charlotte, has long been trying to close the gap between itself and its Atlanta-based rival, and on Wednesday, Lowe’s reported that same-store sales – sales at stores open for at least one year, a key metric for investors – rose more than Home Depot’s for its U.S. business.

In a statement, Lowe’s said excluding some items, earnings for the first quarter were 87 cents a share, topping estimates from Bloomberg-surveyed analysts by 2 cents. Total sales were $15.2 billion, above the $14.9 analysts had estimated and up from $14.1 billion during the same quarter last year.

Same-store sales rose 7.3 percent, topping analysts’ 4.3 percent prediction. For the U.S. business, same-store sales rose 7.5 percent, Lowe’s said.

Home Depot said Tuesday that its U.S. same-store sales rose 7.4 percent, and 6.5 percent for the entire company. Total revenue rose to $22.8 billion from $20.9 billion a year ago – better than the $22.3 billion analysts expected.

Home Depot reported earnings of $1.8 billion for the first quarter, or $1.44 per share, easily surpassing per-share projections of $1.33 that Wall Street analysts had called for. It also topped last year’s quarterly profit of $1.6 billion, or $1.21 per share.

Recent data suggest that the U.S. housing market continues to show gains.

Home values are continuing to rise – the Standard & Poor’s/Case-Shiller 20-city home price index rose 5.4 percent in its most recent report. And builders ramped up construction of new homes in April, as housing starts climbed 6.6 percent to a seasonally adjusted annual rate of 1.17 million units, the U.S. Commerce Department reported Tuesday.

First-quarter earnings haven’t been as strong across all of the retail sector, however.

A handful of department store chains kicked off retail earnings season last week with disappointing results. Macy’s, for example, reported its worst quarterly sales since the recession. Nordstom’s said sales at stores open at least a year fell for the first time in almost seven years. And J.C. Penney Friday also reported a surprise drop in first-quarter sales.

As of April 29, Lowe’s operated 1,860 home improvement and hardware stores in the United States, Canada and Mexico, the retailer said.