What's going on?

Unlike clothing retailers such Macy�s or Nordstrom, home improvement companies are nailing it! In the past few days, Lowe�s and Home Depot have both reported profits that were up significantly versus last year and beat investor expectations.

What does this mean?

Home Depot kicked off the party on Tuesday when it said that sales in the US had risen more than 7% in the third quarter versus the same time period last year. That�s a big growth rate for such a large company (the world's�largest home-improvement and�building supplies company)! Lowe�s growth was a little lower but was still strong. That led both stocks to rise significantly with Home Depot up 5% this week and Lowe�s up 4.5%.

Why should I care?

1. The bigger picture: The US housing market has been particularly strong this year. �As more and more jobs get created, more people want to move into their own homes and that drives prices higher which, in turn, spurs developers to build more houses (and apartments). In a rising housing market, people view spending money on improving their homes an �investment� not an �expense� � which is great for companies like Home Depot and Lowe�s.
2. For stocks: Stocks of home improvement companies have massively outperformed most other retailers. Over the past year, Lowe�s stock is +23% while Home Depot is +28%. Macy�s and Wal-Mart are down 38% and 27%, respectively. One reason is the strengthening housing market. Another is that Home Depot and Lowe�s are less pressured by online competition: would you buy an oven or French-panelled doors at Amazon? Probably not (yet).