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Why Lowe’s And Home Depot Earnings Show Peak In Pandemic-Era DIY Spending

By News Creatives Authors , in Business , at August 18, 2021

What do you do if you’re Home Depot

or Lowe’s? You’ve been on a financial high for the past five quarters, riding a wave of consumer focus on their homes and selling just about everything that’s not nailed down…and some things that are.

Then, you release your quarter results this week and while they are solid, they are not spectacular. Your stock takes an initial hit and the doomsday squad comes out and says the party’s over. When you’ve been great for so long, being very good seems like a big disappointment.

But is it?

The two big DIYers, who have an overwhelming share of market in this home improvement sector, each had some good news to talk about in releasing their second quarter earnings. And while their stocks had drops on Tuesday after the Depot numbers were released and in anticipation of similar Lowe’s news, they are recovering today and in fact the latter is nicely up this week.

They also felt confident that we aren’t looking at sales falling off the cliff, that, in the words of Lowe’s CEO Marvin Ellison, “the pandemic has created a long-term impact of the home’s importance and we just don’t see the changing.”

But each also warned that the surge in consumer home improvement spending seems to have peaked and any gains going forward are likely to be much more modest, closer to the historical ranges each retailer had posted pre-pandemic. Each also had ongoing concerns about supply chain issues holding back additional sales.

And while there were differences in how each company performed – overall it seemed that Lowe’s did a little better than its bigger competitor – the results clearly paralleled each other.

Sales: Home Depot showed a 4.5% increase in comp store sales, while Lowe’s same store sales were off 1.6%. Each posted overall sales gains but they were nowhere in the range of the double digit increases they experienced since the start of the pandemic last spring.

Earnings: Again, both companies were nicely profitable but while Lowe’s beat analyst forecasts for the period, Depot missed the estimates that had been projected by those following the stock.

Selling Patterns: Each retailer said spending by consumers on DIY projects slowed more than big projects typically done by professional contractors and builders. Consistent with that, they reported weekday traffic remained good but that weekend business was softer, which was interpreted as people getting back to leisure activities on Saturday and Sunday rather than home improvement projects. Sales of products used for bigger home projects and installations — typically bought during the workweek — remained strong. Lowe’s also specifically cited home decor as an area of strength.

Both retailers said they remained confident about business going forward with Lowe’s even raising its outlook. Home Depot did not provide any additional guidance as both retailers said product shortages and price increases on those products were too hard to predict given the uncertainties of both issues so far this year.

It’s why, while there was more good news than bad coming from each retailer, looking out at the rest of the year is a risky venture. With the Delta variant changing the landscape almost daily, government stimuli winding down and the general economy uneven, the prospects for these two giant companies remains difficult to predict. Home Depot chief financial officer Richard McPhail may have said it best: “We just don’t know and we don’t want to speculate.”


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