CHICAGO (AP) - A year that started poorly got worse for the nation's home improvement retailers, as the housing market meltdown pushed the economy toward recession and financial institutions sparked a global economic disaster.

But while shares of apparel, home furnishings and electronics retailers plunged as cash-strapped, out-of-work consumers pulled back on spending, shares of the nation's largest home improvement chains - Home Depot Inc. and Lowe's Cos. Inc. - fell only marginally in 2008.

Home Depot's shares are down 13 percent for 2008, while Lowe's is off less than 4 percent, widely outperforming the 40 percent drop seen in the Dow Jones Total Market Index and the 39 percent in value lost by the Standard & Poor's 500.

"I think a lot of that is because the home improvement retailers took their beating in 2006 and 2007," said Morningstar analyst Brady Lemos. "They were the first ones to reflect the challenging housing market. So I think there was a lot of negativity built in and I think they met those lowered expectations."

Home Depot, Lowe's and private competitors like Menard Inc. and True Value Co. were among the early victims of the housing bubble burst. As the decline gave way to a full-fledged recession, shoppers scaled back on everything from home decor items to major kitchen overhauls.

That sent 2008 profits skidding 38 percent at Atlanta-based Home Depot and 15 percent at Mooresville, N.C.-based Lowe's through the first three quarters of 2008.

Amid the continued market slump, the retailers' efforts to keep inventory down resulted in better-than-expected gross margins. In September, Home Depot cut prices on as many as 1,200 items from trash bags to toilets in an effort to boost sales and win back customers. The discounts ranged between 5 percent and 50 percent.

But store closings also mounted and expansion plans were curtailed as the retailers strove to cut costs.

Home Depot closed 15 stores by July. Lowe's cut store openings to 120 in 2008 from 140 as previously planned, and discontinued plans for 37 previously approved stores, mainly because of problems with site configuration and higher-than-expected costs.

"They might have been too aggressive on their store expansion and now they're scaling that back pretty significantly," Morningstar's Lemos said of the companies. "I think both of them are going to be pretty conservative at least until 2009."

Executives at the two publicly traded rivals have cautioned they expect challenges to continue because of the recession and are planning business accordingly.

In 2009, Lowe's will slash the number of stores it opens even further, cutting the ribbon on just 75 to 85 new sites - including seven locations in Mexico and Canada. Lowe's also plans to scale down the size of most new stores in medium and large markets by about 19,000 square feet. The new format will help the nation's No. 2 home improvement chain cut capital outlay costs by almost $2 million per store.

"We believe housing turnover will remain negative until early 2010," Citigroup analyst Deborah L. Weinswig told investors in a research note this month. "We do not expect the recent sales activity, largely driven by foreclosed homes, to translate into a significant improvement in comps."