Lowe's remains one of our favorite names. Despite concern of a softening housing market in 2006, we believe Lowe's solid results are indicative of trends in the broader home improvement industry.

Given the demographics of the targeted Pier 1 consumer, we believe higher gas prices could limit spending levels and further impact comparable sales.

We believe that, with current sales trends still weak, the company's holiday selling season could very well be hampered,

While we believe Home Depot is one of the finest names in retailing, we continue to reiterate our cautious outlook on the shares, given the company's vulnerability to a potential slowdown in the housing environment.