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Secret housing indicators buried in Home Depot’s earnings

A Home Depot location is seen in Niles, Illinois, May 19, 2014. Earnings season will effectively draw to a close this week, with 23 companies scheduled to report, including retailer Home Depot. REUTERS/Jim Young (UNITED STATES - Tags: BUSINESS)
Reuters/Jim Young
Things are looking up.
By Matt Phillips
Published Last updated This article is more than 2 years old.

The numbers: Really good. Profit rose 14% to $2.05 billion. Sales rose 5.7% to $23.8 billion. The number of transactions rose 4.2%. The shares surged.

The takeaway: “Customers clearly feel better about investing in their homes,” Craig Menear, the president of Home Depot’s US retail division, told analysts on the company’s second-quarter earnings conference call. Lighting fixtures, bathroom vanities, and flooring all had a big quarter. Appliances posted double-digit sales growth.

What’s interesting: Home Depot executives noted that sales to larger contractors—known as “pros” in Home Depot lexicon—are outpacing sales overall at the company, which is a good indicator of the health of Home Depot’s housing-related business. However, sales to smaller contractors aren’t growing as fast. “We think a lot of these smaller pros in the depth of the housing recession really exited the business, to start to work for some of the larger pros,” a Home Depot executive told analysts.

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