Home Depot 2013
The Home Depot, the world’s largest home improvement retailer, will report its first-quarter earnings Tuesday during a big week for retail. Pictured: A customer wheels a cart through a Home Depot store in the U.S. Reuters

First-quarter earnings season gains some momentum this week as major retailers ready their results. Wall Street will watch to see if last week’s poor results for the retail sector, notably a plunge in revenue at Macy’s, is a weather vane for problems touching other major retailers. By the end of the week we’ll know how Target Corp., Wal-Mart Stores Inc., Gap Inc. and Foot Locker Inc. fared.

One area of retail is shining like a newly installed faucet: Home Depot Inc. and its smaller rival Lowe’s Companies Inc. have both seen steady growth in recent years as average home ages rise and unemployment falls, and analysts expect that both will report solid earnings this week. Home Depot reports its first-quarter results Tuesday before markets open, followed by Lowe’s on Wednesday morning.

“The home guys are doing good,” Matthew Ward, portfolio manager for Schroders, said in an interview Friday with Reuters Insider, pointing to the strength of retailers involved in home improvement and home furnishings.

Sales of existing homes have jumped 21 percent since the peak of the housing crisis in 2009, according to the National Association of Realtors, and the average age of these homes is rising, to about 35 years. Older homes, lower unemployment and solid consumer confidence mean people are spending more on home improvement projects.

A recent report from UBS noted: "The home improvement cycle remains in full bloom," with 60 percent of homeowners planning to do improvement projects. A mild winter helped boost traffic, too, and Home Depot will likely address how well its first “Cyber Week” of online sales promotions fares. Both Home Depot and Lowe’s have been pushing “Spring Black Friday” sales in recent years in an effort to copy holiday sales promotions. For home improvers, spring is a better season than fall, though some have ridiculed their efforts to make Spring Black Friday a thing.

Analysts polled by Thomson Reuters forecast a 6.8 percent jump in revenue for Home Depot in the three months ended May 1, to a record $22.31 billion, from $20.89 billion in the same period last year. Profit is expected to rise to $1.67 billion, from $1.58 billion, or to $1.34 per share, from $1.21.

Home Depot’s same-store sales (a metric that excludes more recently opened stores in order to make the data more comparable over time) could rise by as much as 8 percent, according to a recent note from Jefferies. "We started the quarter with healthy sales expectations, and our field checks, combined with government sales data, suggest both [Home Depot] and [Lowe’s] should exceed plan," Jefferies analysts said.

For Lowe’s, analysts expect first-quarter sales to climb to $14.84 billion, from $14.13 billion in the same period last year. Profit is expected to rise to $763.1 million, or 84 cents per share, from $673 million, or 70 cents per share.

Home Depot’s stock is currently up 1.5 percent for the year, at $135.42, outpacing the S&P 500’s 0.8 percent rise. Its shares are up about 19 percent over the past 12 months, above the S&P’s nearly 3 percent drop. Lowe’s stock is up 0.6 percent for the year, to $76.46, and up 4.6 percent over the past 12 months.