While there are hundreds of home improvement retailers out there, what are the top five companies?
Home Depot (NYSE:HD)
Home Depot is the biggest home improvement retailer in the U.S. and the world. It’s the eighth largest company overall, according to Fortune, and has more than 1,900 stores. It’s also a stock that should give long-term investors a lot of hope, especially in this environment.
Not only did Home Depot grow its revenues by 10.7% in the most recent quarter, it grew its adjusted earnings per share by 12.5%. Home Depot is growing earnings faster than the market and the economy. After years of disappointing growth, Home Depot may now be beginning to put its issues in the rearview mirror.
Home improvement retailer (and part owner of Lowe’s) Lowe’s is one of the top five companies listed in the Dow Jones. Lowe’s generated $70.6 billion of revenue last year and $4.87 of earnings per share, which was 11% higher than it was in the prior year. Its revenues have grown by roughly 10% over the past three years.
Because of the cyclical nature of the home improvement market, home improvement companies tend to grow over time. Home Depot may be seeing some problems now, but at some point, it may actually benefit from those problems.
Home Depot has managed to grow revenues by more than 11% over the past five years, despite going through a bit of a rough patch in 2016. Its earnings per share have grown by almost 14% in that same time period.
Jo-Ann Stores is a discount chain of home decor and craft stores that has recently undergone some significant changes. Like many retailers, Jo-Ann Stores has struggled through the economic recession, but has started to see some major changes recently.
Jo-Ann Stores has recently consolidated its different brands into a few different ones. The company now owns fabric stores, craft stores, fabric superstores, and national craft superstores (they are now called HobbyCraft). Jo-Ann Stores acquired several companies in 2016, and now has 22 businesses and more than 2,800 stores.
Overall, though, Jo-Ann Stores isn’t the biggest home improvement retailer in the world. Like Home Depot, Jo-Ann Stores is actually a stock that investors may want to think about buying as part of a portfolio to avoid some of the fluctuations that can come with retail stock ownership.
Macy’s (NYSE:M) is another big home improvement retailer, but it is smaller than Home Depot and Jo-Ann Stores. Its revenues grew by about 6.5% in 2016, and it generated earnings per share of $2.69, which was 22% higher than the prior year. That growth was driven by a 7.5% increase in earnings per share.
Macy’s still saw a 1% decline in revenues last year, but that was driven by a 3% decline in earnings per share. That’s bad news, but it should be nothing to worry about long-term. Retailers go through difficult times, and Macy’s could see some problems later this year. That is unlikely, though. Like many retailers, Macy’s seems to be getting back on track.
Home Depot has grown earnings faster than the S&P 500 over the past five years. Over the past five years, Home Depot’s average earnings per share growth has been approximately 10%, which is higher than the market.
Jo-Ann Stores is the best of the big retail home improvement retailers on this list, but there are a few reasons that Home Depot may be better positioned to keep growing for years. Jo-Ann Stores is still trying to get its house in order after a big mess in the last couple of years, and Home Depot has had its fair share of issues over the past few years.
The bottom line on home improvement retail stocks
There are many retail stocks to invest in. Many of those stocks, like Home Depot, are considered a big blue chip. If investors want exposure to the big retail stocks, Home Depot may be the best place to be. Jo-Ann Stores is, too, if investors are looking for more of a play on the retail market, but Home Depot may be a bigger play on the home improvement market.
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Travis Hoium owns shares of Macy’s, Home Depot, and Home Depot. The Motley Fool owns shares of and recommends Home Depot and Macy’s. The Motley Fool is short Home Depot and has the following options: short January 2019 $180 calls on Home Depot and long January 2019 $110 calls on Home Depot. The Motley Fool recommends Home Depot. The Motley Fool has a disclosure policy.