Remade, Remodeled, and Growing
In a weak economy, it's still possible to find companies that thrive, and this big-box hardware company is going to win big in the growing home project and renovation market, writes Elliott Gue of Personal Finance.
The economic recovery is more than two years old, but US gross domestic product (GDP) continues to limp along at a lackluster 2% annualized pace. Unemployment remains at an elevated 8.2%, and the housing market is at best scraping bottom.
Even worse, unemployment soars to nearly 15% if you factor in the millions of underemployed workers and those discouraged workers who gave up looking for a job. By most metrics, the recovery since mid-2009 is one of the weakest expansions in post-war economic history, and tepid growth is likely to continue for the rest of the year.
Not surprisingly, US consumers—along with their counterparts in Europe and other developed markets—are saving more and spending less, bad news for most retailers. However, some consumer-focused companies are actually benefiting from the new age of austerity.
The weak housing market has severely hit investment in new home construction. The silver lining is that many consumers are instead remodeling and maintaining existing properties.
Foreclosed homes are typically in bad shape when they’re acquired at auction from banks. New owners must upgrade and repair these properties to make them suitable for resale. Improvements and remodeling now account for more than 42% of all investment in retail housing, up from about 21% at the height of the housing boom.
Enter Home Depot (HD), the world’s largest home improvement retailer, with roughly 2,000 locations in the US, 180 in Canada, 90 in Mexico, and seven in China.
Home Depot targets both do-it-yourself (DIY) and professional customers.