Best Buy, Home Depot and Lowe's Are Seeing Explosive Growth in This One Category

NEW YORK (TheStreet) -- First-quarter results for big-box retailers have been mixed as consumers remain picky about spending their dollars, but there has been one bright spot: pricey home appliances.

Sales of products such as basic dishwashers, refrigerators and new smart appliances that help conserve energy suggest the U.S. housing recovery remains firmly on track. On Thursday, electronics retailer Best Buy (BBYreported that same-store sales of appliances, which represented about 8% of its first-quarter business, increased a robust 12.3%. That's compared to 9.1% growth in the category a year ago.

That performance stood in contrast to other, more mixed areas of Best Buy's business.

Overall domestic same-store sales increased 0.6% for the quarter, but fell 0.7% when excluding the impact of the company's new installment billing plans for mobile.

The quarter's results were weighed down by declines in every business for the company except appliances and consumer electronics. Same-store sales in electronics increased 7.6% in the quarter, owing to demand for expensive 4K high-definition TVs.

Best Buy's adjusted earnings per share came in at 37 cents, vs. the 29 cents a share consensus estimate. The company also expressed optimism about the rest of the year's results. Shares surged more than 5% in early morning trading.

Best Buy wasn't the only big-box retailer to succeed in selling appliances in the cold, snowy start to 2015. Home improvement retailer Lowe's (LOW), which notched an earnings miss of 4 cents a share  for the quarter, still delivered a strong showing in appliance sales. It was the second quarter in a row of double-digit percentage same-store sales growth in appliances.

In the first quarter, Lowe's launched a home improvement center exclusive in the Frigidaire Pro appliance series. Frigidaire Pro refrigerators can cost as much as $2,000. Lowe's also added 17 "kitchen suites," or tiny shops, to each store late last year, bolstering the in-store presentation of appliances.

Same-store sales for Lowe's increased 5.3% in the quarter, but the company missed earnings and revenue estimates and the stock fell 4.6% on Wednesday.  It was rising by 0.5% in early Thursday trading, though.

Lowe's rival Home Depot (HDechoed the same sentiment on appliances. Overall U.S. same-store sales for Home Depot increased a healthy 7.1%, but sales of appliances did even better, the company said. 

"I would say that we're seeing strength across many departments: water heaters, appliances, our tools, riding mowers, all of our outdoor garden categories and grills," said Home Depot's Executive Vice President of Merchandising Edward P. Decker on the May 19 earnings call. 

The strength in appliances may be impacting sales elsewhere in retail, as consumer see more value in making home investments than in buying more pairs of jeans. 

At Macy's (M), sales in a category it calls "general merchandise, apparel and furniture" was slower than execs expected during the quarter. Macy's first-quarter results underwhelmed Wall Street, and in recent months executives have pinned the blame for sluggish sales on consumers choosing to spend more on services such as Netflix (NFLX) or high-priced home goods. 

Even electronics sales, aside from expensive high-definition TVs, are feeling the squeeze.

"Within general merchandise, we continued to feel pressure in media and electronics," noted a Wal-Mart (WMT) executive on the company's Tuesday earnings call. At Target (TGT), the "hardline" category, which includes electronics, experienced a mid-single-digit percentage drop in same-store sales for the quarter.

Investors shouldn't be shocked by the boom in appliance sales. Existing-home sales increased 6.1% in March to 5.19 million, according to the National Association of Realtors. That was the highest level in 18 months. The median sale price for a previously owned home increased 7.8% from a year earlier to $212,100 in March.

With existing home values rising, consumers could be itching to dump money back into their dwellings, as the strong sales in appliances and at home centers shows.

"From a broader U.S. market perspective, we believe the industry is on track for a multiyear recovery, as evidenced by a recent increase in the existing home sales," said Whirlpool's Chairman and CEO Jeff Fettig on an April 28 earnings call.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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