March 22, 2006

Housing bubble burst effect #4531: DIY home improvement stores will get slaughtered

It's already happened here in the UK with B&Q (they're the Home Depot of the UK) - with results.

When your bubble bursts, no more contractors stocking up on supplies. No more DIY'ers buying equipement to refurb for a quick flip. No more no more.

Stores will close. People will get layed off. Items will be discontinued. And their stocks will plummet.

Take it to the bank, Banker.

Kingfisher paints dismal picture of B&Q's prospects

Analysts warned forecasts for this year looked vulnerable after the group said the home improvement market had deteriorated since the start of the year.

Gerry Murphy, the chief executive, said a "dramatic downturn" in the UK do-it-yourself market, which was the weakest in 10 years, was behind the collapse in profits at B&Q.

In the 12 months to 28 January, retail profit at B&Q fell 52 per cent to £208.5m.

Analysts at CSFB, the company's broker, said: "We believe the UK business has not yet bottomed out and talk of a recovery is very premature."


Anonymous said...

FYI: What your Million dollar could buy in NORTH DOVER, TOMS RIVER, NEW JERSEY 08755

How the heck this suburb had such Luxurious homes when in fact Hospitals supporting the neighborhood is suffering from Medicare reimbursement losses.... Can this Bubble be supported for a longer time period ????

Just North Dover area of Toms River, NJ 08755 !!!

Anonymous said...

Sign of the top - in South Chandler they built a Lowe's and a Home Depot on opposite sides of the street (literally) ... at the same time.

TJ said...

True so true, in all the places I've been in the last few years I've seen Home Depot and Lowes sprouting up faster than new developmets - clearly unsustainable in the long term. Many of these stores are going to close.

Robert Coté said...

Home Depot analyst opinions:

9 strong buy
9 buy
8 hold
1 sell
0 strong sell

Be very afraid. Pump'n'dump on parade.

cabinbound said...

Correct in the near-term (another year or so) -- too early to short 'em right now. (Every sentence in this post IMO, your mileage may vary, etc.):

First the homebuilders need to be put in their place, and that's another 30% from these levels.

The lenders have to take their turn in the dunking booth. Even if no more homes are being built, people will still be buying and selling houses -- including against their will via foreclosures -- and that means continuing business for the mortgage people.

Only then will Home Depot, Lowes, et al be dragged to the slaughterhouse. Even if nobody is buying or selling houses, people will still be fixing them up for themselves ("well if we're stuck here underwater on the mortgage we might as well get rid of that crappy carpet") or in some cases in preparation for sales that might or might not happen.

Until Fannie Mae and Countrywide have charts that look like the homebuilders charts look now, there are better ways to short the bubble.

BTW, KB Home earnings are out; conference call tomorrow morning.

moman said...

Good.....did anyone else read the recent article in Business Week about Home Depot being a strong company who's mgmt believes is seriously undervalued?

It's a sad day when our national pastime has become spending the weekend on some "can't lose" home renovation project. Home Depot has become equivalent to the wineries for the yuppies.

Anonymous said...

Dot Coms were still expanding and signing new office leases well into 2000. (The ones that thought they were "different from the pack".) It takes a while for reality to set in. Lowes and HD will still be opening new stores next year.

Anonymous said...

If they are still opening new stores next year, it will just make them a better short in 2007.

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