As the coronavirus pandemic continues, the gap between retailers struggling to hang on financially and those that have benefited from the unique circumstances brought on over the past year grows wider.

Consumers, which have largely been confined to their houses over the past year, have invested more into their homes. This has meant a boom in sales for home improvement retailers.

The Home Depot on Tuesday reported fourth-quarter net sales rose 25.1% year over year to $32.3 billion, while comparable sales rose 24.5%. U.S. comps increased 25% in the period.

"At the beginning of the year, I would have never thought it possible for the business to grow over $21 billion in 2020. For context, it took us 19 years as a company to achieve the first $20 billion in total sales, and we outgrew that in this year alone," CEO Craig Menear said, according to a Seeking Alpha transcript. "This was enabled by investments we've made in the business as well as the team's exceptional execution and cross-functional alignment."

Home Depot reported net income in the quarter reached $2.9 billion, an increase of 15% from last year. However, the company noted that expenses related to the acquisition of HD Supply Holdings, completed in late December, hurt both quarterly and fiscal earnings. But those investments will benefit the retailer in the long term as it works to gain market share, according to Wedbush analyst Seth Basham.

Home Depot "is making a conscious decision to continue to invest to drive market share gains — 275 bps over the last three years and counting — with the most recent major investment being the acquisition of HD Supply to capture growth in the fragmented maintenance, repair and operations market," Basham said in an emailed note. "These investments should pay off with additional market share gains in 2021 and beyond, as well as faster earnings growth (in the teens) in a normal growth environment."

Home-related projects — either taken on by consumers themselves or completed by professionals — continued their momentum in the fourth quarter. Transactions at Home Depot in the period increased 12.8% from last year to $416.8 million, with the company experiencing "strong double-digit growth" from both its Pro and DIY customers, Menear said.

As the pandemic prevented consumers from partaking in activities they generally would have and restricted them to their homes, the home improvement sector experienced increased demand. "Savings from lower outlays on commuting, eating out and not taking vacations have all been diverted into home projects and activities," GlobalData Managing Director Neil Saunders said.

Heading into January, sales were expected to slow, Saunders added, but as the latest round of stimulus checks began to be distributed in December, momentum continued. According to findings from GlobalData, over 62% of consumers took on at least one home- or garden-related project in the fourth quarter, which is up from 49% in the year-ago period. "From our initial data, we estimate that the average beneficiary spent around 28% of their stimulus check on home related products – a very clear signal that home continues to be a priority area for most consumers," he added. "If a further round of stimulus is provided, we would expect the home retail sector – including Home Depot – to receive a further boost to the sales line."

In fact, foot traffic to Home Depot was up 16.4%, 12% and 22.2% from last year in November, December and January, respectively, according to data from Placer.ai. Similarly, at Lowe’s foot traffic was up 18.7%, 17.4% and 30.4% in the same period.

Home Depot’s online sales in the quarter rose 83% from last year and among sales made through its digital channels, 55% were fulfilled in-store. This was supported by previous tech and infrastructure investments, which allowed it to expand its BOPIS and curbside offerings, Menear said.

For the full year, the retailer’s net sales increased nearly 20% from last year to $132.1 billion, while comps rose 19.7%.

"Home Depot has managed this period in an exemplary fashion. The vast majority of its stores are well stocked, well presented, and have high customer service standards," Saunders said. "Admittedly, there are some gaps in inventory a handful of categories, but these are manageable and do not seriously deteriorate the customer experience. To achieve this outcome, there has been a lot of behind-the-scenes investment and work with suppliers, for which Home Depot deserves credit."

Meanwhile, Lowe’s on Wednesday reported fourth-quarter net sales increased nearly 27% to $20.3 billion, while its comps ticked up 28.1%. Comps in the U.S. increased 28.6%.

"Lowe's beat high sales expectations, which were even higher after Home Depot's robust results yesterday, with continued momentum in February," Telsey Advisory Group Senior Managing Director Joseph Feldman said in an emailed note.

The retailer also reported net income rose some 92% in the quarter to $978 million, while its operating income rose 59% to $1.5 billion. 

"Strong execution enabled us to meet broad-based demand driven by the continued consumer focus on the home, with growth over 16% in all merchandising departments, over 19% across all U.S. regions and 121% on Lowes.com," CEO Marvin Ellison said in a statement. "Looking ahead to 2021, we expect to grow market share and drive further operating margin expansion." 

To support increased sales through its online channels, the retailer has built out its app capabilities and store fulfillment options, like its pickup lockers. Lowe's initially announced plans in September to roll out the technology to most major markets by Thanksgiving. The retailer has now made pickup lockers available at more than 1,200 stores, with plans to expand to all U.S. stores by April, Lowe's Executive Vice President of stores Joe McFarland said on the call.

For the full year, Lowe’s reported net sales increased 24.2% to $89.6 billion, while net income increased 36% to $5.8 billion.

"Lowe's continues to reduce the gap with its largest competitor and gain market share in the fragmented home improvement industry," Feldman said, by improving sales through merchandising initiatives, enhancing profitability by improving store and operating capabilities, improving its digital penetration and using its new loyalty program to attract more Pro customers.

Winning over those Pro customers may be the biggest feat for the two biggest retailers in the space as it will likely result in continued gains as pandemic-induced home improvement projects among consumers begin to wane.