Lowe’s fails to nail earnings as home-improvement retailers face a DIY drought
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Hitting a wall… The urge to retile your bathroom isn’t as strong as it used to be. Lowe’s sales #s disappointed yesterday: quarterly revenue fell more than 5% and profit slipped 11% as shoppers kept cutting back on big-ticket projects like new kitchen floors. Lowe’s said bad weather also hurt sales for its outdoor products (think: four-piece patio sets). The home-improvement staple slashed its annual guidance as DIY customers — who make up 75% of its business — sit on the sidelines.
Locked in: Nearly all of Lowe’s customers have mortgage rates under 4%, but with borrowing costs at multiyear highs, many are avoiding taking out new loans to make upgrades.
Small haul: Last week, rival Home Depot slashed its annual sales forecast and warned of weaker spending to come after its customers pulled back on bigger projects last quarter (transactions over $1K were down 6%).
Reno rollback… High mortgage rates have created the least affordable housing market in nearly two decades. Even as housing inventory rebounds, sky-high prices have kept many would-be buyers out of the market. Median home prices in the US hit a record $419K in May. That’s thrown a wrench in the home-makeover market, since owners tend to spend the most on upgrades within the first three years of buying. In the first quarter, spending on remodeling dropped for the first time in a decade.
Fix the base before the space… When people are antsy about the economy, they tend to spend less on unnecessary upgrades. Experts predict overall spending on home improvement and repairs will fall to about $450B this year — a 7% drop from last year. We’ll get the scoop on the housing market when home sales #s come out this week.