Resurgent Economy Presents Possible Record Spring for Home Depot and Lowe’s

While the majority of retailers look to the holiday season as their biggest months, for big-box incumbents Home Depot Inc. (NYSE: HD) and Lowe’s Companies Inc. (NYSE: LOW), spring is where the money is. The three months to May consistently account for the highest sales of any quarter each year, as consumers flock to kick off home improvement projects as the weather warms.

For the spring rush in 2015, Home Depot hired 80,000 new associates, and the company expects to replicate this hiring drive next year. As we head into 2016 and the spring season approaches, the possibility of record revenues for both companies has arisen.

Not only do people initiate more home improvement projects in the three months to May, but more people buy houses during this period than any other. When people buy houses, they need to stock those houses, which of course translates to a boost in sales for DIY retailers. A key indicator as to the potential for record revenues then, is home sales data.

U.S. new home sales peaked in 2005 at just shy of 1.4 million, but collapsed in the wake of the financial crisis and subsequent recession to lows of 270,000 in 2010. Gradually, however, the numbers have improved. The latest data show 495,000 new homes sold in October. Existing homes sales has mirrored this trend, with 5.36 million sold in October — 2 million more than 2010 post-recession lows.
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Forecasters put consumer confidence at 90.2 during the second quarter of 2016 and expect consumer spending of $12 trillion across the same timeframe. For reference, these figures compare to post-recession lows (July 2010) of 67.8 and $9.8 trillion, respectively.

So with consumer spending and confidence likely to hit decade-long highs next spring, and the already hot housing market set to hit its busy season, things look good for Lowe’s and Home Depot. Record revenues are a real possibility, as both companies bolster sales staff to accommodate the rush. Fiscal 2015 was a record year for Home Depot, and Lowe’s is on track for the same feat. Throw strong economic indicators into the equation, and spring 2016 could be a hit for the two, and in turn, their shareholders.

By Matt Winkler