Tuesday's earnings from Home Depot and former retail darling TJX highlight two important trends: the do-it-yourself (DIY) business shows no sign of deteriorating and discounters like TJX and Ross Stores are no longer "safe havens" from the decline in retail store sales.
It's hard to describe how strong Home Depot's earnings and
They got there by selling more--average ticket was up 3.9 percent, and they got more people in the store: transactions were up 1.6 percent. Wow.
Home Depot is riding the perfect wave. Everything is aligning for them:
1) they are increasing market share;
2) spending on home improvement is growing;
3) home prices are appreciating;
4) Household formation is finally growing again.
These are just the fundamentals. Home Depot also has the advantage of being in that small group of large companies I call "buyback monsters," companies that have been decreasing their shares outstanding for
Home Depot: buyback monster
2004: 2.3 billion
2010: 1.7 billion
2017: 1.3 billion
Home Depot cut its shares outstanding almost in half in the last 12 years. This means that—all other things being equal—Home Depot's earnings per share look almost 50 percent better than it would if they had the same shares in 2004.
Get it? Rising home prices + more households + more stock buybacks = Home Depot up 19 percent this year.
Sadly, such is not the case with discounters. A couple years ago, discounters were all the rage--TJX and Ross Stores were the saviors for store retailers. Other full-priced stores like Macy's and Nordstrom rushed to open off-price outlets.
Things change fast. Today TJX reported earnings slightly above expectations, but second quarter guidance was well below Street estimates. First quarter
It's the same story elsewhere. Store sales in Nordstrom's off-price brand--Nordstrom Rack--were DOWN 0.9 percent year-over-year, even though