Unseasonably warm weather has boosted sales at Home Depot Inc. (NYSE:HD) and other building-supply and home-improvement retailers in recent months. Private companies in the industry, too, seem to be seeing slightly better business trends after several tough years, according to our data.
An analysis of financial statements from privately held building material and supplies dealers (NAICS 4441) shows that sales are rebounding a little after three back-to-back years of declines between 2007 and 2009. Sales were basically flat in 2010 and edged up about 1 percent in 2011.
Profitability, meanwhile, also seems to be improving. After experiencing negative adjusted net profit margins in 2009, privately owned building-material and supplies dealers we analyzed saw margins return to the black in 2010 and increase to between 2 and 3 percent in 2011. Such margins are closer to the levels building material dealers saw during the housing boom.
Net profit margin has been adjusted to exclude taxes and owner compensation in excess of their market-rate salaries. These adjustments are commonly made to private company financials in order to provide a more accurate picture of the companies' operational performance.
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During its quarterly conference call on February 20th, Home Depot said building materials and lumber were among product categories that outperformed average company comparable-store sales, according to a transcript of the call by Seeking Alpha. Flooring, power tools and hand tools also showed strength and boosted the average sales receipt, executives with the largest home-improvement retailer said during the call.
"Warmer-than-expected weather encouraged customers to tackle exterior projects," said Craig Menear, executive vice president of merchandising. But maintenance work and interior projects also contributed, and Home Depot's professional customers, who are larger contractors, builders and the like, are getting more work, he added.
Home Depot even saw some improvement in markets, such as California and Florida, that wouldn't have been weather-related, suggesting a continued stabilization and strengthening in the hard-hit housing markets, CEO Blake said during the call.
We previously found that privately owned residential construction companies saw a 5.3 percent increase in sales in 2011, and profitability improved too.
The Home Improvement Research Institute, a trade group for home improvement manufacturers, retailers and wholesalers, in September forecast industry wide sales of home improvement products will increase 4 percent in 2012. While more recent data feeding into the forecast has been weaker, more people are planning home-improvement projects, the institute said in a recent column for Home Channel News.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.