(02-26-2019, 01:15 PM)Roadmap2Retire Wrote: Thanks for sharing the anecdotal stories, fender.
Everytime we've needed something for the house, Ive always noticed that HD has better pricing power than Lowes or other local retailers. We are doing some internal painting and minor touch ups in the house over the last week and have had to go to HD 3 times so far and found the pricing & service much better than others.
Looks like a good quarter, even though market seems to be selling a bit off. Monster divi raise, so congrats on your raise
For HD that was an OK quarter. The standard is very high and hence the pullback. The bottomline is the top line. The weather was VERY challenging, and tariffs couldn't have helped either. The Div raise was great. Twice what I expected, although they have a history of large raises. I think they might be preparing us for that day when the earnings growth slows. I am starting to think it is going to take a recession to knock them off their stride. And even then, the DIYers still go strong when they are repairing instead of buying new homes. There are clearly HDs stores that are heavily dependent on the home builders. I am sure that is not the case everywhere, including my store. The small time pros visit most everyday and drop a few hundred dollars each morning. I just don't see the home builders paying us an extra 10% for a big lumber package. I know they can get a better deal from non-national chain stores.
I really think the new investor to HD or Lowe's should be a little patient. The days of 20% annual gains may be over forever. I'd make a big bet there will be a better entry point in the next few months, then truly bring the position to size when the economy falters. IMO, there is just no way HD is gonna run to the moon from here. That said, not investing at all while waiting for $150 again is probably a bad move.
I entered my position patiently selling puts and collecting premiums for months until I got assigned on a dip. I've sold covered calls a few times since then as well but that is tricky as the stock bounces fast. I sold $190 calls last week when it ran because I thought earnings would be mediocre this quarter, and next quarter which ends March 31st. Anyway my option premiums are at least equal to my share appreciation the past six months because I bought a few shares when it was above $190, but on the way down. The Div is just a bonus. The new forward Div will look real good if HD pulls back 10%+.
And as far as your low HD pricing, you'll have to trust me in some cases that is a regional thing. We do well here and we are absolutely not the cheapest. If you invest in this sector you'll hear of a non-public company called Menard's. They have a lot of stores in the upper Midwest and they are very successful. Here is what you need to know about them. They have a different business model. Menards is the Wal-Mart of the home-improvement world. They are the size of a super Wal-Mart, and Wal-Mart quality brands are what they sell. Their lumber quality is atrocious. They will put an 18yr old clueless kid in the plumbing department to torment the customers with return trips and returns to get what they actually needed to fix the leaking water pipe. The more complicated HD depts are manned by old retired dudes like myself who have done their own house repairs for a few decades. Here is some more anecdotal...
We can't possible drop all our everyday prices on quality brands to price match junk products or we'd miss earnings for sure. But customers don't always realize the difference. Yesterday a guy approaching me while I was walking by the lumber aisle where I don't even work. he shows me his phone ad and says "I need four sheets of plywood but you guys are sky high, I really don't want to drive to Menard's but you are $7 higher per sheet and that's almost $30!" I looked in his shopping cart and he easily had $200 worth of our other product. This one is easy, even though the product is definitely not the same. Walk him to the register and tell the cashier to price match the plywood, then beat the price just a little. We lost a couple dollars on the plywood. The manager would scold me if I summoned him to authorize this customer service action. The total transaction was still quite profitable, and this guy was thrilled. We'll see him again soon. I worked at Autozone for a while and I would have needed to involve a manager for even a $10 discount. It was embarassing to have zero empowerment and a big waste of AZ management time IMO.