The current low interest rate environment and the desire to move to bigger and better living (and working from home) spaces have driven increased demand for new houses over the past year. This, along with a renovation and remodeling trend to make current homes more comfortable for living and working, has led to rising demand for home improvement products, such as furniture, wall art, and even garden and outdoor decors.
According to a Brandessence Market Research report, the home improvement market is expected to reach $1155.79 billion by 2026, growing at a CAGR of 4.5%.
Because most retailers in this space have increased their online presence, their products and services have become much more accessible to a wider range of consumers. For the reasons stated above, we think it wise to bet on Lowe’s Companies, Inc. (LOW), At Home Group Inc. (HOME), The Container Store Group, Inc. (TCS), Lumber Liquidators Holdings, Inc. (LL), and Tile Shop Holdings, Inc. (TTSH). They sell related products and services and we think are well positioned to capitalize on the industry tailwinds.
Lowe’s Companies, Inc. (LOW)
Together with its subsidiaries, LOW operates as a home improvement retailer internationally. The company offers products for construction, maintenance, repair, remodeling, and decorating. It operates more than 1,974 home improvement and hardware stores and sells its products through its websites and mobile application.
In March, LOW and Chervon announced the launch of FLEX , a line of cutting-edge, cordless power tools. They are powered by a new FLEX 24V lithium-ion battery platform, which delivers 20% more power than competitors and provides faster recharging. The company’s sales are expected to increase with the help of this innovative product.
The company’s total revenues increased 26.9% year-over-year to $20.30 billion for the fourth quarter, ended January 29. Its net earnings have ncreased92.1% year-over-year to $978 million, and its EPS increased 100% year-over-year to $1.32.
For the quarter ending April 30, analysts expect LOW’s EPS and revenue to increase 41.8% and 26.8%, respectively, year-over-year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 86.9% over the past year and closed yesterday’s trading session at $198.44.
LOW’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Momentum, and a B grade for Sentiment and Quality. Within the A-rated Home Improvement & Goods industry, LOW is ranked #10 of 64 stocks.
To see the additional POWR Ratings for LOW (Growth, Value, and Stability), click here.
At Home Group Inc. (HOME)
HOME operates home decor superstores in the United States. The company’s stores offer home furnishings, including accent furniture, mirrors, patio cushions, rugs, and wall art.
This month, the company opened two new home décor stores. And in March it opened three new home décor stores, bringing the retailer’s store count to 226. It also opened its first New York City store at the Rego Center mall on April 21. This shows that the company is rapidly expanding its market reach.
HOME’s net sales increased 41.3% year-over-year to $562 million for the fourth quarter (ended January 30, 2021). Its gross profit for the quarter came in at $218.40 million, which represents a 91.5% year-over-year rise. Its net income was $72.70 million compared to a $224.10 million net loss in the prior-year period. Its EPS was$1.08, compared to a $3.50 loss per share of in the prior-year period.
Analysts expect HOME’s EPS and revenue to increase 191.8% and 140%, respectively, year-over-year, for the quarter ending April 30.It surpassed consensus EPS estimates in three of the trailing four quarters. The stock surged 1,054.3% over the past year and closed yesterday’s trading session at $33.82.
HOME’s strong fundamentals are reflected in its POWR Ratings. The stock has an A grade for Momentum, and B for Growth. In the B-rated, 35-stock Specialty Retailers industry, it is ranked #19 of 35 stocks.
In addition to the POWR Ratings grades we’ve just highlighted, we’ve also rated it for Value, Quality, Stability, and Sentiment. Get all HOME’s ratings here.
The Container Store Group, Inc. (TCS)
Storage and organization products and solutions retailer TCS operates mainly through two segments—The Container Store and Elfa. Its merchandise category includes custom closets, elfa, Laren, and Avera branded products and installation services, closet lifestyle department products, storage, and others. The company also designs, manufactures, and sells component-based shelving and drawer systems that are customizable.
Last October, TCS launched an exclusive, co-branded collection of organizing tools by Marie Kondo. The Container Store x KonMari line features more than 100 sustainably sourced products and was designed to inspire a tidy and joyful home. The assortment became available online and in stores nationwide in January. This initiative is expected to further drive the company’s sales.
TCS’ net sales increased 20.5% year-over-year to $241.34 million for the third quarter ended December 26, 2020. It was driven primarily by an increase in its online sales, which increased 98.1% year-over-year. TCS’ net income increased 720.8% year-over-year to $19.7 million, while its EPS increased 700% year-over-year to $0.40.
Analysts expect TCS’s EPS to come in at $1.09 in its fiscal year 2021, representing a 263.3% year-over-year increase. The company’s revenue is expected to increase 45.8% year-over-year to $222.60 million for the quarter ending June 30. The stock has gained 527.6% over the past year and closed yesterday’s trading session at $14.56.
TCS’ POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has an A grade for Momentum and Growth, and a B grade for Value and Quality.
We have also graded TCS for Sentiment and Stability. Click here to access all of TCS’ ratings. TCS is ranked #3 in the Specialty Retailers industry.
Lumber Liquidators Holdings, Inc. (LL)
LL is a multi-channel specialty retailer of hard-surface flooring and its enhancements and accessories. The company’s offerings include hardwood species, engineered hardwood, laminate, resilient vinyl, water-resistant vinyl plank, and bamboo and cork products, among others. It serves primarily homeowners, or contractors on behalf of homeowners, and provides in-home delivery and installation services.
The company’s net sales increased 11.1% year-over-year to $304.21 million for the fourth quarter, ended December 31. Its gross profit increased 5.4% year-over-year to $117.92 million and its adjusted earnings came in at $31.38 million, representing a 91% year-over-year increase. The company’s adjusted EPS was $1.06, up 86% year-over-year.
For the quarter ending June 30, 2021, analysts expect LL’s EPS and revenue to increase 160% and 35.6%, respectively, year-over-year. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained nearly 235% over the past year and closed yesterday’s trading session at $24.72.
It’s no surprise that LL has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Momentum and Value, and a B grade for Sentiment and Quality.
Click here to see LL’s rating for Growth and Stability as well. LL is ranked #17 in the Home Improvement & Goods industry.
Tile Shop Holdings, Inc. (TTSH)
TTSH is a specialty retailer of natural stone and man-made tiles, setting and maintenance materials, and related accessories. It offers marble, travertine, granite, quartz, sandstone, slate, and onyx tiles, and ceramic, porcelain, glass, cement, and wood look. It also offers metal tiles, primarily under the Rush River and Fired Earth brands. The company also offers delivery service through third-party freight providers.
In February, TTSH opened a new showroom in Wayne, New Jersey. The new store offers homeowners and trade professionals more than 6,000 tile and stone products, and design expertise. The store is expected to increase the company’s consumer base significantly.
TTSH’s net sales climbed 3.8% year-over-year to $81.60 million for the fourth quarter (ended December 31, 2020). Its gross profit for the quarter came in at $55.90 million, which represents a 3.9% year-over-year rise. The company’s EPS came in at $0.03 compared to loss per share of $0.09 in the prior-year period.
The stock has gained 560.6% over the past year and closed yesterday’s trading session at $7.20.
TTSH’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to Strong Buy in our proprietary ratings system. It has an A grade for Momentum and Quality, and a B grade for Value and Growth.
To see additional POWR Ratings for TTSH (Stability and Sentiment), click here.
TTSH is ranked #2 in the Specialty Retailers industry.
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LOW shares were trading at $196.04 per share on Friday afternoon, down $2.40 (-1.21%). Year-to-date, LOW has gained 22.93%, versus a 11.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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