Home Depot and Lowe’s continue to struggle amid home market slump

2024.06.11

If, like many industry watchers, you subscribe to the theory that the home improvement market is a leading indicator for the home furnishings sector … Well, make yourself comfortable for a little bit longer.

In reporting first-quarter financial results, both Home Depot and Lowe’s shared lackluster numbers, and neither was particularly optimistic about the rest of the year. The numbers would have been even worse if not for their services for contractors and other professionals, which outperformed sales to individual homeowners—the DIYers who most closely correlate to home furnishings buyers.

The home improvement twins have been in a rut for much of the past year after putting up stellar numbers during the pandemic years, when everyone and their brother was at home pouring money into remodeling and redecorating. It was the same rush that the furnishings side of the home business experienced—but the DIY sector did even better than furniture.

The DIY realm also held up longer, even after consumer spending shifted toward out-of-home pursuits like travel, entertainment and dining out, but eventually, it hit a wall as well. By now, you know the culprits: a slowing housing market, inflation and higher interest rates. So this past quarter offered few surprises.

Home Depot reported its U.S. same-store sales down 3.2 percent, and total revenues down from $37.2 billion a year ago to $36.4 billion for the first quarter this year. That just missed Wall Street estimates, although the brand’s earnings of $3.63 a share (down from $3.82 last year) did beat the analyst consensus.

Lowe’s shared numbers a week later, and they weren’t any better. Revenues were down 4.4 percent to $21.4 billion versus a year ago, and earnings per share dropped from $3.78 last year to $3.07 this year. Both top and bottom lines did beat analyst forecasts, however.

The chains blamed decreased activity among homeowners, each saying their pro builder businesses held up better, although those numbers, too, were relatively weaker. Home Depot also blamed a late spring for the slowdown—a perennial excuse in the retail world, though it probably has more validity when it comes to homeowners putting off repairs and remodeling than it does in, say, fashion.

Neither retailer was especially enthusiastic about the outlook for the remainder of the fiscal year, predicting flat or even slightly off sales. If there’s a silver lining to all of this, it’s that Home Depot and Lowe’s aren’t expecting big declines—a sign that the worst of the slowdown may be over, even if the recovery is nowhere in sight.

Placer.ai, the online service that tracks foot traffic in stores, says things may have indeed bottomed out for these two giants in a recent report: “Q1 2024 visit data suggests that the category may be ready for a comeback. Throughout Q1 2024, Lowe’s saw its monthly visit gap narrow steadily—and in April 2024 saw the first YoY visit uptick the chain has experienced since 2021. And YoY visits to Home Depot were down just 0.3 percent in February 2024 and up 1.0 percent in March. Though Home Depot saw a minor visit gap emerge once again in April, the home improvement powerhouse appears to be on solid footing heading into the spring season.”

The foot-traffic tracker contrasted these numbers with smaller niche players in the home improvement space, like Tractor Supply Co. and Harbor Freight Tools, which showed gains this past quarter. It also reported increases at Ace Hardware, and Ace itself said it registered a small increase in U.S. same-store sales in its most recent quarter, and a 1.1 percent increase in the average amount people spent per store trip. Total revenue for the company systemwide rose 2.5 percent from this period a year ago.

None of this is earth-shattering (at least compared to the go-go years of 2020 and 2021), but it’s encouraging news for the home furnishings business. Depending on the category, these products tend to trail home improvement spending by six to nine months, so if indeed the home improvement business seems to have hit bottom and is slowly starting to rebound, furnishings could see a return by early 2025. It’s not an exact science—no one should bet the farm on that timeline—and it’s not exactly tomorrow, but these days, any good news is more than welcome by retailers and suppliers looking for signs of home hope.