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The Home Depot, Inc. (HD), Lowe’s Companies, Inc. (LOW): Improve Your Portfolio With These Home Improvement Companies

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The housing market in North America is expected to recover with growing consumer sentiment. According to the National Association of Home Builders, the sales of new homes surged 8.3% to 497,000 units in June, the fastest pace in the last five years. Moreover, the housing market is expected to grow by 3.1% annually in the next five years. California is especially driving the growth of the home improvement companies. Three home improvement companies are pushing hard to gain more market share by opening new retail stores and upgrading their online services.

Enhancing online platform by adding more features

Lowe’s Companies, Inc. (NYSE:LOW) recently entered into agreement with Orchard Supply Hardware to acquire the majority of its assets for around $205 million. With this acquisition, Lowe’s Companies, Inc. (NYSE:LOW) will be offering its products to new customers and enhance its presence in the densely populated markets of California, where Orchard has 89 stores. Currently, Lowe’s is operating 110 stores in California, and it will acquire at least 60 Orchard stores, which are located in highly attractive markets of California where Lowe’s has negligible presence.

In the last fiscal year, Orchard reported revenue of $657 million, and Lowe’s expects, by adding Orchard under its portfolio, it will generate revenue of $52.3 billion this year from $50.5 billion in the last fiscal year.

The Home Depot, Inc. (NYSE:HD)

Lowe’s Companies, Inc. (NYSE:LOW) reported strong quarter-over-quarter revenue growth of 18.5% to $13.09 billion in its first-quarter (ended May 3) results backed by recovery in the housing market combined with continuous reconstruction activities after Hurricane Sandy. These reconstruction activities should continue, which will boost demand for home-related products, especially plumbing, kitchen appliances, and other electronic items in the U.S., by around 3%, year-over-over, to $145 billion this year. Lowe’s Companies, Inc. (NYSE:LOW) has a market share of nearly 11.5% in the U.S. home-related items, just 2.5% less than its strong competitor, The Home Depot, Inc. (NYSE:HD) , which holds nearly 14.2% share.

To gain more market share in North America, Lowe’s plans to open 10 new stores this year. It has also improved its online sales platform, “MyLowes,” with the introduction of a smartphone application. In addition, MyLowes’s online personalized tools enable customers to design their home interior and help them execute the designs via broad user friendly content and state-of-the-art technology. The company expects MyLowes will help it regain market share by attracting more customers with its personalized offerings. These initiatives will help Lowe’s improve its EPS by around 19.5% to $2.12 this year and $2.56 next year.

The Home Depot, Inc. (NYSE:HD)’s home-related products contribute nearly 27% to its revenue. To compete with Lowe’s, the company initiated its interconnected retail strategy by rolling-out its “Buy Online, Ship-To-Store” facility. This will give customers access more than 300,000 items in its stores, and it expects to improve its online business. Moreover, by leveraging its “First Phone” mobile technology, The Home Depot, Inc. (NYSE:HD) enables buyers to verify product prices and availability.

The company is expecting additional sales of 4%-7% this year. Moreover, its previous acquisition in the home services marketplace, Redbeacon, a one-stop online solution, helps customers connect with contractors for home maintenance, repair, and redesigning needs. Therefore, the company expects to report EPS of approximately $3.59 in 2013 and $4.18 next year from $3.07 last year.

Opening new stores and remodeling will drive revenue

Lumber Liquidators Holdings Inc (NYSE:LL recently posted its second quarter results. Its sales reported year-over-over growth of 22.2% to $257.1 million with a 14.9% rise in comparable store sales. Increased customer traffic, which has contributed 9.1% to comparable store sales, drove this growth. The company expects Hurricane Sandy, which contributed $145 million in the second quarter, will help its comparable store sales grow further.
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