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Home remodeling boom continues into 2021

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There is light at the end of the tunnel on the major appliance shortage triggered by the COVID-19 pandemic shutting down key component-making factories in China in 2020. Yahoo Finance’s Brian Sozzi weighs in.

Video Transcript

JULIE HYMAN: You're watching Yahoo Finance Live. And we have been watching the markets here, where we are seeing a little bit of selling going on today. But something, Brian Sozzi, you have been watching has to do with the boom that we've been seeing in the housing market, prices going up, supply is tight.

And of course, that doesn't just affect the home builders. It doesn't just affect the lenders. There's really a ripple effect beyond that.

BRIAN SOZZI: Yeah, Julie and Myles, judging by these numbers, maybe GameStop should start selling couches and really cool lights, because the home furnishing sector is absolutely on fire and continues to be on fire from 2020. And just connecting the dots here, we got Ethan Allen, they sell high-end furnishings, obviously, they are out with earnings last night. Wholesale sales for them up 10 and 1/2%, retail sales up 4.1%.

But that was held back, because some of those stores were closed because of the COVID-19 restrictions. Why I think you're seeing the stock trade up here is by this nugget they put in there-- retail written orders up 44.9%. Guys, that's a pretty much an outright boom for very expensive Ethan Allen furniture. Also, e-commerce sales up 115% year-over-year.

And then also yesterday, we had Sherwin-Williams, the paint maker, in its consumer segment-- now this business is a business that reflects sales in Lowe's and other home improvement type outfits-- sales in that business up 13.6%, profits up 103%. Their CEO really credited strong sales of new homes in America and existing home sales as well. And guys, let's keep in mind what we heard from Whirlpool yesterday. Whirlpool CFO Jim Peters telling us off another strong quarter of its own, where North America sales outpaced fourth quarter GDP. We asked him what is driving those results. Here's what he said.

JIM PETERS: I think some of the big drivers that we're seeing is, you know, we already mentioned that very positive growth within housing, not just new housing-- new home construction, but also you're seeing strong existing home sales. And then with the consumer's continued focus on the home and nesting, what we're seeing is a lot more in terms of home renovations where people are investing in their kitchens that they've been spending more time in.

But we continue to see that trend gaining steam. And if you think about just the back-- the low level of existing homes for sale right now, as well as the backlog of new home construction starts, you know, we see that trend continuing on a very positive line for an extended period of time here.

BRIAN SOZZI: Exiting the third quarter, really, I would say that Wall Street was very concerned about the growth rates in these home improvement companies slowing. But the fourth quarter suggests that didn't happen, and it hasn't happened to kick off the first quarter, Myles.

MYLES UDLAND: You know, just a couple other names in here, Sozz, RH, Restoration-- formerly known as Restoration Hardware, stock went from 100 to 500. Now, it's off its highs, but it topped out, I think, 50-- 507, 508, something like that just about two weeks ago. So Williams-Sonoma, another name in there, had a tremendous run. Pretty much anybody that sells anything that's going to go in your home, high end, low end, all points in between, they've had a good year.

And I think that that-- you know, the management wants you to think it's going to continue forever. I don't know where it falls down on that. The market has certainly priced in that this is not, however, just a one-off event. I mean, stocks don't double, triple, quintuple because investors think COVID was a big pull forward. I mean, I think there's a view on a lot of these businesses, Sozz, as you were mentioning, that this is a new era for their growth trajectory after kind of a down beat last decade.

JULIE HYMAN: And RH-- not to be confused with the other RH that is much in the news right--

MYLES UDLAND: That's right.

JULIE HYMAN: --now, Robinhood--

BRIAN SOZZI: Or GME. Or GME.

JULIE HYMAN: --Restoration Hardware. Robinhood, remember, not-- not a publicly traded company. And as things continue as they have been, maybe it won't end up being, as Brian Sozzi was talking about earlier. On that point, just wanted to mention one of the other heavily shorted stocks in which we appear to be seeing a squeeze, that's American Airlines.

The company has just announced it is proposing to issue up to $1.1 billion in common stock, so following on the heels of the likes of AMC benefiting or taking advantage of the moment of seeing the shares go up to do a stock offering. So again, in the case of American Airlines, it is going to be issuing up to $1.1 billion in common stock. This on a morning when the SEC is repeating that it is going to be looking into the trading activity around some of these stocks that you see on your screen.