Home Depot CEO doesn't see a recovery until last half of 2010
Frank Blake, chairman and CEO of the home improvement retailer, told analysts Thursday that housing indicators are still weak and hitting new lows, so it's too soon to claim we're in a recovery. Blake noted that spending on housing as a percent of gross domestic product-- an indicator Home Depot uses to gauge the health of the economy and its business prospects -- is still dropping and foreclosures continue to plague many housing markets.
"As we set new lows, you're always hesitant to say 'this is it,' " Blake said at the annual Goldman Sachs Global Retail conference. While Home Depot's sales have improved every quarter this year, he noted that they are merely just "less bad" than the previous quarter.
"The way we are planning for the year is continuing improvement but in the less bad category," he said.
Home Depot is in its fourth year of negative comparable-store sales since the housing sector slump started in the third quarter of 2006. That trend doesn't seem likely to change anytime soon as many markets continue to struggle with a record number of foreclosures, Blake said. As a result, the CEO said he isn't expecting a recovery until "the back half of 2010."
"You have to clean through the inventory of homes before you start to see a recovery on those markets," he said. Home Depot recently reported that the number of transactions in stores grew in the second quarter, but the amount of each transaction remains down, as homeowners look to embark on smaller projects on a tight budget. Sales to professionals, which Home Depot defines as tickets over $900, also remain depressed.
Until home prices stop dropping and settle down, the home improvement market will stay weak, said Blake. "There's a lot to the psychology of stable pricing," said Blake. "The customers feel a lot better about investing in their homes if they feel the value of that home is at least stable."