Home improvement retailers caught in downdraft
Reuters Story - October 08, 1998 13:24
NEW YORK, Oct 8 (Reuters) - Shares in Home Depot and Lowe's fell more than 10 percent -- a much larger drop than the overall market's losses -- but analysts were at a loss to explain the tumble.
"There is no news out there that would make Lowe's and Home Depot fall more than anybody else," Lehman Brothers analyst William Julian said.
Shares of Home Depot and Lowe's fell 3-15/16 to 32-5/16 and 3-/14 to 24-7/16, respectively. Eagle Hardware & Garden Inc. shares fell 2-1/4 to 17.
The S&P Retail Index fell 6.42 percent to 572.03 points, while the Dow Jones Industrial Average fell more than 210 points, or 2.7 percent.
Despite seeing no fundamental reason why the stocks are down, Julian said home improvement retailers acted as cyclical stocks during the recession of the early 1990s and fears of a new economic downturn could be hurting the stocks.
Analysts, however, said the low interest rates, low unemployment, higher income and the performance of these two companies do not justify the selloff.
Another analyst, who wished to be unnamed, said the only other factor could be home starts declining on a month over month basis and slipping consumer confidence.
He was quick to point out that the consumer confidence was previously at record highs and the declining home starts was more of a regional problem affected by weather.
The unnamed analyst said that Lowes monthly same-store sales, which increased 4.1 percent in September, met expectations. Also, Home Depot told his firm that it has not seen a slowdown in consumer spending and that same-store sales will grow in the mid single digits for the quarter.
Julian was reluctant to say what when a buying opportunity would occur for these stocks.
"It's like trying to catch a falling knife," Julian said about trying to
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