After heightened demand during the pandemic, growth at Home Depot and Lowe's begins to normalize

2022.05.31

After two years of heightened sales in the home improvement sector, demand is beginning to normalize.

The Home Depot on Tuesday reported first quarter net sales reached $38.9 billion, a 3.8% increase from last year when pandemic-induced buying trends and government stimulus helped propel sales. However, the increase represented the slowest sales growth in two years. Home Depot beat analyst expectations for comparable sales with overall comps up 2.2% and U.S. comps up 1.7%, according to a company press release.

The retailer’s operating income ticked up 2.6% to $5.9 billion, while net income increased 2.1% to $4.2 billion.

“Home Depot reported a strong 1Q22, with a better-than-expected comp of 2.2%, reflecting solid home improvement demand, supported by elevated home prices, healthy remodeling activity, and solid household formation,” Telsey Advisory Group analysts led by Joseph Feldman said in emailed comments.

Overall transactions fell 8.2% from last year, but the average ticket price increased 11.4%, signaling continued spending on big-ticket categories as well as inflation, according to Feldman.

Executives on Tuesday said sales from its Pro customers outpaced those from DIY customers and said the company is continuing to invest in this segment through enhanced fulfillment options and a more personalized online experience, among other things.

The company raised its guidance for fiscal 2022, now expecting sales and comps growth of about 3% and operating margin of about 15.4%.

“Q1 last year was our highest first quarter sales and our highest comp at 31% in a very, very long time,” CEO Ted Decker said on a call with analysts Tuesday. “So as we went into this year, we were understandably conservative as to how we thought Q1 would pan out. But in fact, we saw that the consumer is very engaged. The Pro is very strong, and we posted those results with very much delayed spring.”

Meanwhile, Lowe’s on Wednesday reported first quarter total sales fell about 3% year over year to $23.7 billion. Total comps were down 4% — missing both FactSet estimates (down 2.5%) and Telsey estimates (down 2%), while U.S. comps fell 3.8%.