Depot and Lowe’s: Their outlook for the home improvement industry
Home Depot and Lowe’s recently released their Q4 and fiscal year earnings, and both companies painted a positive view of the home improvement industry for 2023 and beyond.
By the numbers:
Both companies saw year-over-year declines in transactions that were offset by higher inflation-driven prices.
- Transactions were down at both Depot (-5.3%) and Lowe’s (-7.4%).
- The average ticket increased at Depot (+8.8%) and Lowe’s (+7.0%).
Looking ahead, Depot is “bullish” on the industry, pointing out the following:
- More than 90% of U.S. homeowners either own their homes outright or have fixed-rate mortgages under 5%.
- More than half of homes in the U.S. are over 40 years old.
- Depot’s guidance for 2023 calls for flat total and comp sales, with transactions down in the low single digits.
Lowe’s sees ‘tailwinds’ for their business based on the following trends:
- Strong millennial household formation, baby boomers' increasing preference to age in place, and widespread remote work.
- The company sees the slowdown in housing turnover as being driven by higher rates and low supply rather than demand.
- Lowe’s is projecting comp sales to be flat to down -0.2% in 2023.
The big picture:
Both companies believe these conditions will continue to drive consumers to trade up in place and upgrade their existing homes to meet their evolving needs.
What we're watching:
Millennials are increasing their debt at a historic pace, which may delay their ability to take on larger home improvement or repair projects.
- Total debt balances among Millennials were more than $3.8 trillion in the fourth quarter.
- Their 27% jump in total debt over the past 3 years is the fastest pace of debt accumulation since the 2008 financial crisis.
The bottom line:
The best brands will work to increase share through additional SKUs, side stacks, and new distribution. This will not only help buoy sales in the short term, but it could also potentially pay off nicely in the mid-to-long term.