Last Saturday morning my father and I made our weekly trip to the local Lowes. For some reason, it has been a tradition amongst the men in my family to make at least one home improvement store trip each Saturday. More often than not, due to poor planning and forgetfulness, we make several trips before we finally get a project finished.

This week’s trip was a bit different than normal. We arrived at the usual time, right after our morning coffee, but something was different. We got a parking spot right up front. Instead of walking across a parking lot half the size of the county, we walked a mere 20 feet to the front door. The store was nearly deserted. The usual hustle and bustle of do-it-yourselfers was gone. All that was left was a few ragged-looking contractors and some other guys escaping from their wives’ to-do lists.

The tide has turned

Given our experience last week, it was not surprising to see Home Depot’s (HD:NYSE) lackluster annual report this morning. The store reported its first ever annual sales decline. In just the fourth quarter, profits plunged by more than 25%. If you needed more proof the economy has entered a major slowdown, this is it.

For the past five years or so, major home improvement stores like Home Depot and Lowes were the poster children for the nation’s soaring economy. The stores were packed with folks with extra cash looking to spruce up their homes and take advantage of a booming housing market. Now those same buyers are running low on cash and the high-flying days of a housing boom are long gone. Rough waters lay ahead for these stores.

Over the last twelve months, Home Depot earned $4.4 billion, down from last year’s entry of $5.76 billion. Profits dropped by more than a billion dollars, even after the chain opened over 100 new stores. Company officials believe the decline will continue throughout 2008, with a forecasted earnings estimate showing a decline of nearly 20% for the year.

For the typical consumer, this news is not all that bad. After all, the average price of the goods sold at Home Depot during the fourth quarter declined by over 2% to $54.96. Apparently the inflation wreaking havoc in the rest of the market has not entered the home improvement sector just yet. But you can bet it will.

You can still be rich

So what does this all mean for you, the average investor? Well, it is definite proof the economy has slowed and it is impacting the lives of ordinary Americans. When Home Depot’s parking lots are empty, cash is scarce, interest rates are dropping, and unemployment lines are growing.

For investors that have not made the move yet, it is time to start looking towards safety. Get your retirement money out of the speculative high-growth plays. Save that sector for your “play” money. Start looking at utilities, under-valued financial-sector plays, and even ways of playing the liquid cash market.

There are still plenty of ways to profit from this market, but the opportunities are not the same as they were just a year ago. If you have not made a major portfolio adjustment yet this year, now is the time to do it. Today’s news proves it.

Andrew Snyder
TFN