Anchor Capital: Essential market review, 26 February

By Anchor Capital

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South African Market Review
South African markets closed lower yesterday. Grindrod plummeted 3.9%, after it reported an11.2% drop in FY14 revenue, while Murray & Roberts Holdings dropped 2.5%, after posting a 15.2% decrease in 1H15 revenue. Retailers, Clicks Group, Truworths International and Massmart Holdings plunged 2.4%, 2.3% and 2.2%, respectively, amid expectations that the tax increases announced by the Finance Minister would likely to reduce consumers’ spending power. However, Barclays Africa, Standard Bank Group and Nedbank climbed 2.6%, 1.2% and 0.8%, respectively. Old Mutual advanced 0.2%. The company announced that it has completed the acquisition of Quilter Cheviot. The JSE All Share Index fell 0.3% to close at 53,217.75.
UK Market Review
UK markets finished lower yesterday, pulling back after closing at a record high in the previous session. Weir Group tumbled 8.9%, after the firm cautioned that it anticipates lower FY15 sales and earnings, amid weak oil prices. GKN fell 2.1%, extending previous session losses which were triggered after the company stated that FY14 sales and pretax profit fell due to currency movements. Energy sector stocks, Tullow Oil and Royal Dutch Shell slipped 0.9% and 0.3%, respectively. On the upside, St James’s Place advanced 4.3%, after the firm lifted its annual dividend by 50.0%.Whitbreadclimbed 2.7%, after projecting that FY15 results would come in at the top end of market expectations. The FTSE 100 Index declined 0.2% to close at 6,935.38.
US Market Review
US markets ended mixed yesterday, as the second day of testimony by the US Federal Reserve Chairperson, Janet Yellen, failed to provide clues on the timing of an interest rate hike. Hewlett-Packard plummeted 9.9%, as the company projected weaker-than-expected earnings for 2Q15 and for FY15. Apple declined 2.6%, after a US federal jury ordered the company to pay a fine of around $532.90mn for infringing patents owned by Smartflash LLC. However, TJX Companies, Dollar Tree and Target advanced 3.3%, 2.2% and 0.3%, respectively, as their 4Q14 results surpassed market expectations. The S&P 500 Index fell 0.1% to settle at 2,113.86, while the DJIA Index rose 0.1% to close at 18,224.57. The NASDAQ Index declined marginally to finish at 4,967.14.
Asia Market Review
Markets in Asia are trading mostly higher this morning. In Japan, Yamada Denki jumped 5.7%, after announcing that its President boosted his stake in the company. TDK Corp. rose 1.9%, after a report indicated that the firm plans to increase its production capacity in Japan. In Hong Kong, Cheung Kong Infrastructure Holdings advanced 1.4%, after its FY15 earnings more than doubled. However, Nine Dragons Paper Holdings plunged 10.3%, after reporting a 30% decline in its 1H15 profits. In South Korea, Century Company and Taihan Textile Company fell 5.7% and 3.2%, respectively. The Nikkei 225 index is trading 0.9% higher at 18,755.10. The Hang Seng index is trading 0.8% up at 24,976.20, while the Kospi index is trading 0.1% lower at 1,988.44.
 

Commodities
At 06:00 SAST today, Brent crude oil fell 0.9% to trade at $60.75/bl. Yesterday, Brent crude oil rose 5.1% to settle at $61.30/bl, following upbeat Chinese manufacturing data and after the Saudi Arabian Oil Minister, Ali al-Naimi, stated that oil markets have settled down after an extended period of volatility late last year and demand for oil is growing. Meanwhile, the US Energy Information Administration’s report showed that US crude oil inventories rose by 8.40mn bls last week.

Yesterday, the Illinois North Central No.2 Yellow corn spot prices fell 0.6% to $3.54/bushel.At 06:00 SAST today, gold prices advanced 0.3% to trade at $1,208.92/oz. Yesterday, gold gained 0.4% to close at $1,205.00/oz, on a weaker US dollar and as Chinese markets reopened after a week-long break. The US Federal Reserve Chairperson reiterated that the Fed could wait several additional meetings before raising rates, in the meeting that was held with the finance committee yesterday.

Yesterday, copper rose 0.1% to close at $5,803.00/mt. Aluminium closed 0.7% lower at $1,778.75/mt.

Currencies

Yesterday, the South African rand strengthened against the US dollar. The US Federal Reserve Chairperson reconfirmed that the bank is in no hurry to increase interest rates.

Meanwhile, on the economic front, new home sales numbers in the US came in above market estimates. Going forward, market participants will eye producer prices data in South Africa for January and consumer prices data in the US, scheduled later today.

The yield on benchmark government bonds fell yesterday. The yield on 2015 bond declined to 6.16% while that for the longer-dated 2026 issue fell to 7.57%.

At 06:00 SAST, the US dollar is trading 0.1% higher against the South African rand at R11.4596, while the euro is trading 0.2% higher at R13.0278. At 06:00 SAST.

Yesterday, the euro advanced against the US dollar and declined against the British pound. Meanwhile, the ECB President, Mario Draghi, indicated that the future of the eurozone was at risk unless member countries gave up some independence and created more Pan-European government institutions. Moving ahead, traders will keep a tab on a string of economic releases today, including German unemployment rate and Gfk consumer confidence and consumer confidence in the eurozone.

At 06:00 SAST, the euro advanced 0.2% against the US dollar to trade at $1.1367, while it has weakened 0.1% against the British pound to trade at GBP0.7311.

 Economic Updates 

The British Bankers’ Association (BBA) has reported that BBA mortgage approvals rose to a level of 36.39k in January, in the UK, higher than market expectations of a rise to a level of 36.00k. BBA mortgage approvals had recorded a revised reading of 35.82k in the prior month.

In Spain, the producer price index eased 0.5% in January on a monthly basis. The producer price index had fallen 1.1% in the prior month.

The National Institute of Statistics has reported that (non-EU countries) trade deficit in Italy recorded a level of EUR 0.23bn in January, following a (non-EU countries) trade surplus of EUR 5.25bn in the previous month.

The National Institute of Statistics and Economic Studies (INSEE) has indicated that, in February, consumer confidence in France registered a rise to 92.00, compared with a level of 90.00 in the prior month. Markets were expecting consumer confidence to rise to a level of 91.00.

The European Central Bank (ECB) President, Mario Draghi, in his testimony to the European Parliament in Brussels, stated that the central bank is willing to accept Greek bonds for funding once it is convinced that Greece is on track to successfully complete its bailout program.

The Mortgage Bankers Association has indicated that, in the US, mortgage applications dropped 3.5% in the week ended 20 February 2015 on a weekly basis. In the prior week, mortgage applications had fallen 13.2%.

In January, new home sales fell 0.2%, on monthly basis, to a level of 481.00k in the US, compared with market expectations of 470.00k. In the previous month, new home sales had registered a revised level of 482.00k.

The US Federal Reserve’s Chair, Janet Yellen, reiterated her stance that the central bank would consider raising interest rates “on a meeting by meeting basis,” depending on the improvements in jobs market and the nation’s economic conditions.

New Zealand has registered trade surplus of NZD 0.06bn in January, compared with a trade deficit of NZD 0.19bn in the previous month. Markets were anticipating the nation to post a trade deficit of NZD 0.16bn.

Corporate Updates

South Africa

Standard Bank Group Limited: The company, in its updated trading statement for FY14, revealed that it now anticipates EPS to exceed by between 8.0% and 12.0% from the previous year. According to IFRS basis, the diluted EPS is expected to be between 1,089.30c and 1,129.60c, compared with 1,008.60c posted in FY13. On a normalised basis, diluted EPS is expected to be between 1,087.50c and 1,127.70c, compared with 1,006.90c posted a year ago.

Grindrod Limited: The transportation and logistics company, in its FY14 results, stated that revenue dropped 11.2% to R13.91bn from the preceding year. Its headline diluted EPS stood at 107.10c, compared with 118.20c reported in the previous year.

Murray & Roberts Holdings: The company, in its 1H15 results, indicated that revenue decreased 15.2% to R15.95bn from the preceding year. Its diluted EPS from continuing operations stood at R0.80, compared with R0.58 posted a year ago.

Hospitality Property Fund: The specialised real estate investment trust, in its 1H15 results, indicated that revenue was up 2.8% to R0.22bn from the same period a year ago. However, its basic and diluted EPS was 41.08c, compared with 45.42c recorded in the preceding prior year. The company reported the A-linked unit distribution of73.33c, compared with 69.83c posted in the same period a year ago, while the distribution of the B-linked unit dropped 52.6% to 9.12c, compared with the corresponding period previous year.

Old Mutual: The company announced that it has completed the acquisition of the leading discretionary investment manager, Quilter Cheviot. The company stated that the acquisition is its strategy of building the UK’s leading retail investment business and to be able to deliver a complete set of solutions which meet the wide-ranging needs of advisers and clients.

Shoprite focuses on furniture stores: Shoprite is planning an “aggressive new store rollout” in the beleaguered furniture market that includes 68 new stores by the end of June, 53 of which will be in sites formerly occupied by failed competitor Ellerines.

Competition Commission approves Growthpoint — Acucap deal: The Competition Commission has given the green light on Growthpoint Properties’ takeover of Acucap Properties, but the deal is still subject to further review.

UK and US

Lowe’s Companies Inc.: The retail home improvement and appliance stores company, in its FY14 results, indicated that net sales increased 5.3% to $56.22bn from the preceding year. Its diluted EPS stood at $2.71, compared with $2.14 reported in the previous year. The company expects total sales to increase 4.5% to 5.0% in FY15.

Target Corporation: The retailing company, in its FY15results, indicated that sales rose 1.9% to $72.62bn from the previous year. However, it incurred a net diluted loss of $2.56/share, compared with net diluted EPS of $3.07 posted a year ago. In 1Q16, the company expects adjusted EPS, reflecting results of operations in its single-segment business, to be in the range of $0.95 to $1.05, compared with $0.92 in 1Q15.

TJX Companies Inc.: The apparel and home goods company, in its FY15 results, indicated that net sales grew 6.0% to $29.08bn from the previous year ended 1 February 2014. Its diluted EPS was $3.15, compared with $2.94 recorded in the prior year. For FY16, the company expects diluted EPS to be in the range of $3.17 to $3.25.

Salesforce.com Inc.: The cloud computing company, in its FY15 results, indicated that total revenue increased to $5.37bn from $4.07bn reported a year ago. It incurred net diluted loss of 0.42/share, compared with net diluted loss of $0.39/share recorded in the previous year. For FY16, the company projected its revenue to be approximately between $6.48bn and $6.52bn, an increase of 20.0% to 21.0% annually, which includes an FX headwind of approximately $175.00mn to $200.00mn.

Avago Technologies Limited: The company, in its 1Q15 results, indicated that net revenue was $1.64bn, compared with $0.71bn reported in the same period a year ago. Its net diluted EPS rose to $1.26 from $0.53 posted in the same period previous year. The company expects non-GAAP net revenue to be down 3.0% to up 1.0% in 2Q15 on a sequential basis. Furthermore, it announced that it has entered into a definitive agreement to acquire Emulex, a leader in network connectivity, monitoring and management, in an all-cash transaction valued at approximately $606.00mn, or $609.00mn net of cash and debt acquired.

L Brands Inc.: The fashion retailing company, in its FY15 results, indicated that net sales were $11.45bn, an increase of 6.3% compared with the previous year. Its EPS increased 14.8% to $3.50 from the preceding year. The company currently expects FY16 EPS to be between $3.45 and $3.65.

Dollar Tree Inc.: The company, in its FY15 results, indicated that that net sales were up 9.7% to $8.60bn from the corresponding previous year. Its diluted EPS increased to $2.90, compared with $2.72 reported in the prior year. The company estimates consolidated net sales for 1Q16to be in the range of $2.15bn to $2.20bn, based on a low to mid single-digit increase in same-store sales and 6.9% square footage growth; and net sales for FY15 is estimated to be in the range of $9.21bn to $9.45bn.

Hewlett-Packard Co.: Media reports revealed that the company is in talks to acquire Aruba Networks and the deal could be announced as soon as next week.

BlackBerry Limited: The telecommunication and wireless equipment company announced that it is working with Google to enable its BES12software to run Android for Work, giving users access to Google’s productivity suite.

Town Sports International: The company announced that Daniel Gallagher has been appointed Chief Executive Officer and Robert Giardina has been appointed Executive Chairman of the Board.

Whitbread Plc: The coffee shop and restaurant company, in its trading statement, indicated that total sales for the 11 weeks ended 12 February 2015, grew 14.3% and like-for-like sales rose 5.8% from the previous year. The company stated that its FY15 results are expected to come in towards the top end of current expectations, as sales at its cheap hotels and Costa Coffee chain continued to rise.

Barratt Developments: The residential property development company, in its 1H15 results, revealed that revenue was up 24.6% to GBP1.58bn from the same period previous year. Its diluted EPS stood at 16.60p, compared with 9.20p reported in the preceding period a year ago. The company expects total forward sales including JVs as at 22 February 2015 up by 17.5% to GBP2.28bn from GBP1.94bn posted on 23 February 2014.

St. James’s Place: The wealth management company, in its FY14 results, stated that total European Embedded Value (EEV) operating profit was GBP0.60bn, compared with GBP0.46bn reported in the previous year. Its diluted EPS dropped 21.1% to 102.70p from the preceding year. The company rewarded its shareholder with a higher-than-expected 50.0%payout increase.

Weir Group: The engineering company, in its FY14 results, indicated that revenue from continuing operations increased marginally to GBP2.44bn, compared with GBP2.43bn reported in the previous year. However, its diluted EPS decreased to 33.70p from 156.60p posted a year ago. The company stated that its total mining capital expenditure is expected to reduce for the third year in succession in FY15, albeit at a lower rate than FY14.

Man Group: The publicly-traded hedge fund company, in its FY14 results, stated that net revenue was up 2.4% to $1.08bn from the previous year. Its diluted statutory EPS stood at 20.50¢, compared with 2.90¢ posted in the preceding year.

Henderson Group: The investment management company, in its FY14 results, indicated that its net fee income increased 12.5% to GBP0.52bn from the preceding year. Its diluted EPS from continuing operations was 11.10p, compared with 9.40p posted in the prior year. The company indicated that it would be launching a fund in Australia this year that would allow investors to directly access the group’s global equities income products.

Petrofac Limited: The oil and gas services company, in its FY14 results, revealed that revenue was $6.24bn, compared with $6.30bn reported in the prior year. Its diluted EPS decreased 10.6% to 168.99¢ from the previous year. The company reaffirmed that it remains on course to deliver net profit in FY15, although it lowered the guidance to $0.46bn from $0.50bn.

British Land Company: The company announced that it has signed a new GBP485.00mn unsecured revolving credit facility at an initial margin of 90.00 bps with a syndicate of 7 banks.

Wm Morrison Supermarkets: The company announced the appointment of David Potts CBE as the new Chief Executive Officer. He will join the company on 16 March 2015.

Meggitt Plc: The company announced that its subsidiary, Heatric, has been chosen to supply recuperative heat exchangers for a revolutionary natural gas-fired pilot plant from NET Power offering low-cost energy with no carbon dioxide emissions.

Financial Times

Moody’s cuts Transocean to junk: Transocean, one of the world’s largest offshore drilling contractors, has had its debt cut to junk by Moody’s because of the strain on the company’s financial position created by the slump in oil prices and heavy capital spending commitments.

Weir under pressure from low oil price: The Glasgow-based engineer, which makes valves and pumping equipment for miners and oil and gas companies, said it expected a “significant reduction” in group revenues and lower operating margins in FY15 and announced plans to slash 22.0% of its North American workforce.

Brazil hit by Petrobras downgrade: Brazilian bonds, equities and currency were rocked on Wednesday after Moody’s cut its ratings of state-controlled oil company Petrobras to junk status, citing a corruption scandal at the company.

EU set to act on Gazprom antitrust case in ‘matter of weeks’: The EU is only weeks from launching one of its biggest antitrust battles by proceeding with its case against Gazprom, potentially further souring its relationship with the community’s biggest external gas supplier.

Power crisis knocks South Africa economy: A deepening power crisis that has triggered almost daily outages across South Africa, hitting key industries as well as households, has forced the government to sharply downgrade its growth forecast for the year.

Petrofac confident of weathering oil sector woes despite charges: Pre-tax profits at Petrofac fell by more than three-quarters last year to $171.00mn after the UK oil services company booked impairment charges of $463.00mn across its portfolio of assets.

House prices in Oxford overtake London: Oxford is the most unaffordable place to live in Britain, outstripping London, according to an analysis of housing market data and local wages.

Morgan Stanley pays $2.60bn to settle mortgage claims: Morgan Stanley has reached a $2.60bn settlement with the US Department of Justice, drawing a line under claims that it mis-sold mortgage-backed securities in the run-up to the financial crisis.

Deutsche Bank poaches Jeff Urwin from JPMorgan: Deutsche Bank has poached a top Executive from US rival JPMorgan to fill the vacant position of co-head of its investment banking arm.

RBS Chief Ross McEwan declines GBP1.00mn of his pay: Ross McEwan, Chief Executive of Royal Bank of Scotland, has decided to hand back GBP1.00mn of his pay package.

UK law enforcement agencies to consider HSBC probe: Britain’s tax authority has called law enforcement agencies to a meeting next week to start assessing whether there are grounds to open an investigation into HSBC.

JPMorgan plans branch closures amid switch to mobile apps: JPMorgan Chase had for years been building its retail footprint, adding branches as recently as FY13 to fill out the network inherited through the acquisition five years earlier of WaMu.

UK banks turn to social media to fend off digital competition: British banks are starting to use social media sites to allow money transfers in the latest sign of traditional lenders attempting to fend off competition from digital payment providers.

Pharmacyclics considers $19.00bn sale: Pharmacyclics is considering a sale that could value the US cancer drugs maker at about $19.00bn, according to people familiar with the matter, suggesting that consolidation in the pharmaceutical industry is far from over.

Arms companies charged taxpayers for croquet and magicians: Arms companies have fraudulently charged the taxpayer for croquet lessons, horseracing trips, speeding tickets and magicians, the defence secretary will reveal on Thursday, as he argues for further reform of the Ministry of Defence’s troubled procurement arm.

Fiat and VW accused of overstating fuel efficiency: An Italian consumer group has launched legal action against Fiat Chrysler Automobiles and Volkswagen in a further example of carmakers being sued for allegedly overstating fuel economy performance.

Daimler welcomes Apple into car market: Plans by Apple to enter the automotive market show that the industry has “major growth potential”, a top Daimler Executive has claimed, while also insisting that the German luxury carmaker is “well-positioned” to combat the emerging competition.

BBC licence fee to remain for decade, says Commons committee: The BBC licence fee has “no long-term future”, a committee of MPs has concluded, but they have said it should remain for the next decade.

Bouygues profits slide under pressure from telecoms competition: Bouygues, the French construction, media and telecoms conglomerate, reported a slide in operating profit in FY14 as it battled tough economic conditions at home and fierce competition in the telecoms sector.

UK law firms report strongest growth for 6 years: The improving UK economy has helped law firms record their strongest growth for six years in FY13.

Lego constructs record sales and earnings: Metalbeard’s Sea Cow, a Jungle Tree Sanctuary and Arctic Base Camp were among the products that propelled Lego to record sales and earnings in FY14, cementing its position as the world’s most profitable toymaker.

Lenovo China website hit by cyber attack: Less than a week after it disabled controversial software that left users of its laptops vulnerable to hacking attacks, Lenovo has confirmed that its website has been hacked.

Google shakes up European units in face of tougher rules: Google is overhauling its European business to meet the challenge of a changing and more combative regulatory landscape on the continent where politicians and commercial rivals are pushing to curb its power.

Google makes late pitch to modify internet rules: Google will learn on Thursday whether its last-ditch lobbying has persuaded US regulators to modify plans to ensure all internet traffic is treated equally, after the company warned that part of the proposal was self-defeating.

Google machines learn to beat human gamers: Google’s secretive artificial intelligence team in London has unveiled an algorithm that can teach itself from scratch to play a range of early computer games as well as or better than a human tester — the latest sign of the growing prowess of “smart” machines.

Apple loses $533.00mn patent case in Texas: A Texas jury has ordered Apple to pay damages totalling half a billion dollars to a little-known company that has claimed that the iTunes store violated its patents.

Sim card maker Gemalto admits it was ‘probably’ hacked: The world’s largest manufacturer of Sim cards admitted that it was “probably” hacked by British and American intelligence services in FY10 and FY11 in a possible attempt to spy on billions of mobile telephone users.

HP tumbles on hit from currency swings: Hewlett-Packard added its name to a long list of US multinationals hamstrung by the strengthening dollar, slashing its full-year earnings guidance by more than a third as currency swings, as well as restructuring and separation costs, weigh on its results.

Visa rules hamper UK tech start-ups, says migration committee: Britain’s technology start-ups are at a disadvantage because visa rules block skilled workers from outside Europe, the government’s official immigration advisers have said.

TelefĂłnica promises sharper focus will bring return to growth: TelefĂłnica’s profits declined sharply in the fourth quarter after the Spanish telecoms group was singed by the impact of Venezuelan currency weakness, but it promised a return to growth in FY15.

Qantas soars back into the black with A$206.00mn interim profit: Qantas Airways reported a A$206.00mn ($162.00) after tax interim profit on Thursday, as cost cutting and lower fuel prices helped the Australian airline bounce back from its worst annual loss in its history in FY14.

Italy to sell 5.7% of state-controlled utility Enel: Italy’s Treasury has confirmed that it is selling a 5.7% stake in state-controlled utility Enel, worth about EUR2.20bn, in an accelerated book-build, a long-anticipated move that is a key plank of the government’s privatisation programme.

Weir Group: Down 8.7% to GBP17.00, after the pumpmaker said the outlook for oilfield equipment this year was worse than in the FY12 downturn.

Gulf Keystone Petroleum: Jumped 54.9% to 55.00p after saying it was talking with potential bidders as part of a review of funding.

Lex

TSB: baggy trousers: Every parent knows the trick. Buy your kids clothes that are a couple of sizes too big, and they will soon grow into them. TSB is trying something similar. The UK bank, which was spun off from Lloyds last year, has far more capital, and a far higher cost base, than it needs. The bank’s loan to deposit ratio is low at 76.0%. So TSB’s aim is to grow into its capital, costs and deposits. It wants to expand its core loan book by half over five years. Unlike a child, however, TSB is not certain to keep growing. Last year was not an auspicious start, with loan volumes in the core part of the bank falling 6.0% to GBP19.00bn. TSB blames its absence from the mortgage broker market, which is the source of almost two-thirds of new mortgage lending. It has rectified that, launching in the broker market last month, and is planning net lending growth of GBP1.50bn this year. Market growth will help — the Council of Mortgage Lenders expects mortgage lending to rise 7.0% this year. But TSB has a lot of lending to do to hit its target and fill up those baggy trousers. The risk is that, in a push to reach its lending target, TSB makes unwise acquisitions (talks with Aldermore, a newish bank focused on the small business market, have been rumoured) or that it starts lending too cheaply.

Online lenders: money for something: Has the hour of online lending arrived? It seems, at least, close at hand. This week two of the biggest US online lenders, On Deck and Lending Club, both reported triple-digit growth in loan origination, reaching $1.20bn and $4.40bn for full-year FY14, respectively. Both companies believe that, using technology and big data to make credit assessments, they can outdo traditional banks on both the cost of making loans and the interest rates that they charge borrowers. At Lending Club rates are indeed lower than on the credit card debt that most of its loans refinance. And On Deck, a small business lender, provides small, short-term loans that most banks simply do not offer. Yet the lending infrastructure of these companies is — at their current scale — expensive. On Deck’s effective loan interest yield rate was 39.0% last quarter, and defaults have hovered around 7.0%; yet it did not turn a profit. One reason for high costs is that in its earlier years most On Deck loans originated from financial advisers, to whom On Deck paid commissions. The company has reduced its reliance on these. Instead it is spending more on advertising to drive business owners directly to its website. Marketing costs rose 83.0% last year, part of an expense budget that grew 80 %. On Deck’s operating expense has grown more slowly than its loan origination. Still, the company reported losses every year.

Home Depot/Lowe’s: Humble pie: Humility is a rare but welcome attribute in companies, especially in those that are on top of their game. But it can also be worrying. Home Depot on Tuesday reported a strong fourth quarter — same store sales were up 8.0%. Rival Lowe’s on Wednesday similarly beat expectations. Shares in the two companies are each up at least 70.0% in the past two years. Yet as Craig Menear, Home Depot’s Chief Executive, admitted, the underlying economic and housing indicators do not fully explain the retailer’s strength. Mr Manear wondered aloud about the link between house price growth and home retailer revenue. US house prices rose 4.0% in FY14, after 13.0% growth in the previous year. He cited a study from a decade ago that concluded there was a lag of several months between house price growth and the impact on home-improvement spending. He also suggested that Home Depot’s resilience could be down to changes in the housing stock. Nearly 4.00mn single family homes became rental stock between FY06 and FY13. They are slowly moving back to being owner-occupied and require significant remodelling. However, Home Depot’s modesty had its limits. The company also pointed out its own prescience in expanding towards categories such as appliances and cleaning supplies, which helped to boost traffic.

*Published with special permission by Anchor Capital (ACG)

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