Home, sweet home

Last night on television I heard an ad so mendacious that I wonder if its authors couldn't be sued: "Train to be a construction manager! Projected to be a huge growth field through 2012." Only if you're able to relocated to Dubai.

This morning, a bracing dose of reality: Home Depot's earnings have cratered. There is no field associated with housing that is going to be a good place to be for the next couple of years--unless it is nailing foreclosure notices to front doors.

Comments

The Home Depots here in New Orleans seem to be doing pretty well. :-)

Posted by Marcus | May 20, 2008 9:35 AM

Home Depot may be struggling to compete with Lowe's. While both stores use a similar concept, in my somewhat limited experience Lowe's stores tend to be cleaner and better arranged.

Posted by Peter | May 20, 2008 9:55 AM

The Home Depot headline numbers are misleading. HD decided to close some stores and abandon some expansions. They chose this quarter to write off $500+ million. Otherwise, their earning per share this quarter would have been practically unchanged from last year. Funny how the numbers worked out that way. Writing off that much money is certainly not good news but HD's finances are certainly better than implied by the WSJ headline and lede.

HD's chief competitor, Lowe's, also posted a loss for the quarter, 16%. I would not be surprised to learn that Lowe's took advantage of HD's situation and accelerated some of its on write-offs. A 16% loss doesn't sound so bad against a 66% loss for a main rival.

Investors and blogging heads should always look beyond the headlines. Caveat emptor and all that.

Posted by Emma Zahn | May 20, 2008 9:59 AM

Locksmiths are actually doing quite well in this downturn. Banks have to hire locksmiths to change the locks when they forclose, so they are getting a lot more business as a result.

Posted by Corey | May 20, 2008 10:09 AM

Emma Zahn is right, those numbers are misleading. Last year Home Depot sold HD supply which greatly reduced its exposure to the housing market. The present decline seems to be coming from a decline in renovations and small contract jobs.

Home improvements are probably procyclical (with regard to the housing market) but I am unsure what they can tell us about the condition of the housing market. I would assume they are a lagging variable but I don't know.

Posted by Gordon Gekko | May 20, 2008 10:22 AM

Given that an investor wants earnings generally rising year over year, then the numbers are in fact disturbing.

HD and Lowe's always grew earnings, so that seems to be a problem now.

On the other hand, the exact time to be loading up on a stock should be when it is hitting its lows.

Posted by Finn | May 20, 2008 12:19 PM

Hold on there...

1. The total number of Americans is increasing. Housing will always be needed. Last year's boom was as silly as this year's bust.

2. There is a HUGE push for certification in just about every field. Being a "certified" project manager is going to be a huge differentiating factor vs. the non-certified folks. (e.g., LEED certification.)

3. Govt. projects are huge as a share of construction and municipal oversight is increasing in provate projects. On each project, more money is being spent on paper pushers than in the past.

4. Construction is not limited to residential developments. There is a ton of environmental rehab projects, as well as transportation infrastructure, "greenification" of old buildings, academic and governmental facilities, etc.

5. As materials get more expensive, good project managers are much more important. Finance and operations planning play more of a role when input prices are high and volatile. When steel and transport costs are low, you get it delivered whenever it suits your workers. When the steel and transport costs are high, you schedule your work around it.

Posted by Stephen W. Stanton | May 20, 2008 1:56 PM

"Last night on television I heard an ad so mendacious that I wonder if its authors couldn't be sued: "Train to be a construction manager! Projected to be a huge growth field through 2012." Only if you're able to relocated to Dubai."

Megan,

Not all construction is residential construction. There's also this construction field called infrastructure. The American Society of Civil Engineers has estimated that we will need to spend $1.6 trillion over the next several years just to maintain the adequacy of our existing infrastructure. There is bipartisan support in Congress for getting big money spent on infrastructure. In addition to the public safety need for it, investment in infrastructure will increase the long term productivity of our economy and it will of course create lots of jobs in the near term. Count on infrastructure spending increasing next year, whoever wins the elections in November.

I am. That's why I bought stock in Perini Corp. (PCR) earlier this year.

Posted by Fred | May 20, 2008 4:10 PM

Any stats on the commercial construction industry? I believe it's more common for "construction management" types to work for contractors doing work for commercial clients - e.g. office buildings, corporate interiors, laboratories, and the like.

Posted by John V | May 20, 2008 4:26 PM