When your (arguably) biggest remaining economic problem is the housing sector, the retailers who stock supplies for building and remodeling houses are decent places to look for an indication the economy might be turning around. Lowes (LOW) reported yesterday, and the “drop, but not as bad as expected” was widely lauded as a cause of yesterday’s rally. (Hey, when the bar is set low…)

Home Depot (HD) reported today, and it looks like another case of the bar being set low and us being thankful they didn’t trip over it:

For the period ended May 3, Home Depot posted income of $514 million, or 30 cents a share, up from $356 million, or 21 cents a share, a year earlier. The latest results included $117 million in charges related to the closing of its Expo home-design business. The prior year’s results included $543 million in restructuring-related charges. Excluding items, earnings fell to 35 cents from 41 cents.

Revenue decreased 9.7% to $16.18 billion as same-store sales fell 10%.

Analysts surveyed by Thomson Reuters expected earnings of 29 cents on revenue of $15.86 billion.

Gross margin slipped to 33.7% from 33.9%.

The number of customer transactions declined 1.3% as the average amount spent per transaction slid 8.2%. Industry analysts said earlier this month that consumers still seem to be buying small-ticket items, like fertilizer and paint, but sales of items carrying fatter profit margins, like riding lawn mowers and kitchen cabinets, remain weak.

Now, I like Frank Blake. The primary reason is that he is not Bob Nardelli, but other reasons include his general bent toward honesty and his willingness to take advice from the internets. So I’m glad to see these numbers not suck, but I think there needs to be some wariness mixed into this rah-rah:

-  One reason the numbers look better than last year: fewer restructuring charges. “Taking fewer charges than last time around” is not a long-term business strategy.

- Revenue decreased. The number of customer transactions decreased, and the dollar value of each transaction decreased a lot (8%). People are repainting and, to continue yesterday’s theme, buying seeds for the Aerogarden. They’re not popping wheelies in riding lawn mowers on the front 6′x12′ strip of their zero-lot-line McMansion or stocking up on timber to build their kids a pirate ship in the back yard. Paint and screws will sustain a corner hardware store, but not a big-box.

For fun – if you want to know what I think of whenever I hear positive reports this earnings season – remember Mad TV’s “Lowered Expectations”? Yep: