Housing still hurting, but DIY looks good

Weak housing data notwithstanding, plenty of people spent money fixing up their homes this spring judging by the results of select retailers with exposure to the home improvement market.

Lumber Liquidators, operator of 277 specialty flooring stores, said its second-quarter sales increased nearly 20% to $210 million and same-store sales increased 12.4%. The company also saw a dramatic improvement in the profitability of those sales as gross margins expanded to 37.3% from 34% the prior year. Total profits more than doubled to $12.2 million, or 43 cents a share, compared with $5.3 million, or 19 cents a share the prior year.

Buoyed by a strong start to the first half of the year, the company increased its full year sales and profit forecast by a wide margin on the same day that the U.S. Commerce Department reported weaker-than-expected sales of new homes. Sales of new, single-family homes in June fell 8.4% to a seasonally adjusted 350,000 unit annual rate. That figure was below a Commerce Department estimate that put the May annual rate at 382,000. Government statistics also estimated there were 144,000 new homes for sale at the end of June, or nearly a five months supply of inventory at the current rate of sale.

The bleak news on the housing front didn’t deter Lumber Liquidators from increasing its full year sales target to a range of $750 million to $775 million, up from the previous range of $720 million to $750 million. The company also increased its full year profit forecast to a range of $1.30 to $1.42 compared to a prior range of $1.10 to $1.25.

“We believe Lumber Liquidators is successfully navigating through what remains a challenging and uncertain retail environment, particularly for large-ticket, discretionary purchases,” said Robert Lynch, president and CEO. “Our value proposition continues to resonate well with consumers, and as we look toward both the back half of the current year and into the next, we are confident in our ability to continue to drive traffic, improve our operations, expand our operating margin and grow our footprint.”

The company opened 14 new stores during the first half of the year and plans a total of 20 to 25 units for the full year.

Lumber Liquidators is benefitting from the repair and remodel trend as people stay in their homes and look to spruce up flooring. The same phenomenon is impacting the nations leading paint retailer, which reported stellar results last week. The Sherwin-Williams Company said sales during the quarter ended June 30 increased 14.6% to nearly $1.5 billion at the company’s 4,000 unit Paint Stores Group. Operating profit increased more than 29% to $267 million and same store sales increased 13.9% as the company was successful in raising prices to offset increased raw material costs.  “We are continuing to invest in our business. In the first six months, Paint Stores Group opened 20 net new locations. For the year, we expect our Paint Stores Group to open 60 to 65 new stores,” said Sherwin-Williams chairman and CEO Christopher Connor.

The strong results from Sherwin-Williams and Lumber Liquidators come as the National Association of the Remodeling Industry reports in its quarterly survey that remodelers expect to see stronger sales in the next three months. Part of their reason for optimism is due to pent up demand, but low interest rates are helping with financing as well. The remodelers surveyed by the trade group said they are seeing an increased number of inquiries, requests for bids and a higher conversion rate.

Source: retailingtoday.com