Two Retailers Fend Off Amazon -- WSJ
15 Agosto 2016 - 9:03AM
Dow Jones News
Do-it-yourself chains Home Depot and Lowe's enjoy growth beyond
website's online reach
By Paul Ziobro
Do-it-yourself chains Home Depot Inc. and Lowe's Cos. appear to
have built a retail oasis mostly walled off from the reach of
online behemoth Amazon.com Inc.
Their uniqueness in the retail landscape will be driven home
next week as the two chains report second-quarter earnings.
Analysts project sales at existing stores will rise 4.8% at Home
Depot and 4% at Lowe's, according to data provider FactSet. That
would mark the eighth straight quarter of at least 4%
year-over-year growth for each company.
Such gains are the envy of other retailers. Kohl's Corp., Macy's
Inc. and Nordstrom Inc. each recently posted ongoing sales declines
amid difficulty getting more people to shop in their stores.
Wal-Mart Stores Inc., which reports its fiscal second-quarter
results on Thursday, is projecting a small same-store sales gain,
while Target Corp., whose quarterly earnings are due Wednesday, has
projected a sales dip.
The retailers that have reported earnings thus far have pointed
to slightly improving trends from earlier in the year. But they
also have seen their business models upended by the rise of online
shopping that reduces the need to visit a store for a sweater or
blender. Macy's is responding by closing 100 locations.
Executives from the home improvement chains cite a litany of
favorable housing trends for their good fortunes. New households
are being formed and housing turnover remains steady. Millennials
are even willing to buy homes, albeit six years later than normal,
according to Home Depot. All that spurs trips to large chains to
pick out appliances and paint colors, and plan projects around the
home.
About two-thirds of U.S. homes are also more than 30 years old,
Home Depot says, requiring more spending on upkeep. Low interest
rates and rising home values -- which are now just 2% below their
July 2006 peak, according to S&P CoreLogic Case-Shiller Indices
-- make replacing a roof, or even updating a kitchen, more
palatable, as homeowners view their homes as investments, not
expenses.
Such trends have kept the home-improvement sector growing well
above the broader retail market. Sales at home-improvement chains
and similar stores are up 6.4% through July versus the same period
a year ago, according to the Commerce Department. In contrast,
overall retail sales are up 2.8% during the same period. Only
drugstores and restaurants this year among brick-and-mortar
locations are outrunning the home improvement stores.
Online sales, of course, are growing much faster, up 10.5% at
non-store retailers this year, according to the same federal data.
Much of that is coming from Amazon. But the e-commerce giant
doesn't have a toehold in large parts of the home improvement
space, like lumber, paint and gardening supplies. Home Depot says
just 25% of its business -- smaller, easy-to-ship items like power
drills and small hand tools -- faces tough online competition.
That doesn't mean either chain is immune to Amazon. A UBS survey
in June found that 11% of consumers planning a home improvement
project themselves planned to buy something from Amazon. That is
far behind the 36% who said they planned to shop at Home Depot and
the 21% at Lowe's, but up from just 7% a few months back.
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
August 15, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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