Home Depot and Lowe’s about to hit a sales wall? – RetailWire
23 Aug 2021
A recent slowdown in the hot housing market and a reduction in the number of homeowners tackling DIY projects have raised concerns about the near-term growth rates of Home Depot and Lowe’s.
Second quarter sales failed to meet Home Depot analysts’ targets.
Craig Menear, CEO, told analysts that sales had shifted to more weekday sales and fewer weekend sales, a trend the chain attributed to consumers returning to travel and other recreational activities.
Customers have also become “more comfortable taking on larger projects” as evidenced by sales of its “Professional Customer” segment, which includes electricians, plumbers and painters, overtaking those of DIY customers for the second consecutive quarter.
Composition gains in the last quarter were led by kitchen and bath and lumber. The channel saw negative lineups in categories such as paint, hardware and indoor / outdoor garden that had been strongest a year ago, as Americans stuck at home began to splurge on upgrades to their home, including setting up offices.
Richard McPhail, executive vice president and chief financial officer, nevertheless said that the fact that home prices have risen by more than 20% from two years ago should nonetheless lead to further investment in repairs and renovations. “As we look ahead, not only have we seen this appreciation in home prices, but homeowners’ balance sheets are incredibly healthy,” he said. “The state of mortgage financing is incredibly healthy. And so, that’s some of the reasons we’re optimistic.
Lowe’s second quarter sales exceeded expectations because strengthening in professional sales gap DIY decline. SLarge compositions in the kitchen and bathroom, flooring, appliances and decor topped the 20% growth in these categories last year.
Marvin Ellison, CEO, likewise noted The appreciation in house prices and historically low mortgage rates support a “very positive” outlook for residential investment. He further noted that short-term housing turnover pressures are not supply-side.
“Our research shows that it will take years for the housing supply to meet expected demand. This remains a very positive indicator for home improvement, ”said Mr. Ellison. “In addition, the mindset of customers vis-à-vis their home is very simple. As long as their home increases in value, they view home improvements and improvements as an investment, not an expense.
DISCUSSION QUESTIONS: Do you see any short-term sales pressure for home improvement chains as the US economy opens up? Are you more or less convinced that home improvement chains will gain a long-term boost in the wake of the pandemic?
“Home improvement chains will thrive, especially if the Delta variant gains strength and forces us to cocoon again.”