Home Depot And Lowe’s Shake Off Slowing Home Improvement Industry Fears

Home improvement giants Home Depot and Lowe’s shook off fears of a slowdown last week by reporting solid financial results for the first quarter.

“Fiscal 2022 is off to a good start as we posted the highest quarterly revenue in company history,” said Ted Decker, CEO and president of Home Depot, in a letter to shareholders. “The solid performance in the quarter is even more impressive as we had a slower start to the spring compared to historic growth last year and this year.”

Marvin Ellison, president and CEO of Lowe, provided a strong revenue outlook in a letter to shareholders.

“Our sales this quarter were in line with our expectations, with the exception of our seasonal outdoor categories which were impacted by unusually cold temperatures in April. As 75% of our customer base is DIY, our sales in the first quarter were disproportionately impacted cooler spring temperatures, and now that spring has finally arrived, we are pleased with the improved sales trends we are seeing in May,” said Ellison.

Home Depot and Lowe’s may not have been hit hard by the 40-year high inflation that is beginning to take its toll on consumer spending at conventional retailers like Target and Walmart.

“For Home Depot, consumer spending has been strong and their business has not yet felt the effects of inflation,” Scott Sheridan, CEO of retail brokerage Tastyworks, told International Business Times. “Home Depot is slightly less exposed to some of those factors, but it could fall victim to inflation, especially if we see that spill over to commodities like wood.”

The strong performance of home improvement stocks came as a surprise to some. The home improvement industry had remained strong during the pandemic recession as existing shelters forced people to spend more time at home and catch up on home improvements.

Now that these mandates are over and life has returned to normal, you should expect the home improvement renaissance to cool down. But apparently it didn’t.

“After a steady period of massive growth that continued through early 2022, the broader home improvement industry saw a significant slowdown in attendance in March and April,” Ethan Chernofsky, VP of Marketing at the traffic analytics platform Placer.ai, told IBT. “This indicated either that the broader home improvement boom was slowing or that the current economic headwinds were impacting visits compared to the start of the segment’s normal seasonal peak. Still, Home Depot and other leaders in the area saw of home improvement that the number of visits started to pick up, the pace again towards the end of April and that trend continues in May.”

Chernofsky sees the long-term benefit offered by significant migration shifts spurred by the pandemic lasting for some time to come.

“The home improvement industry may have an even longer period of growth in store,” he said. “While it may not reach the heights seen in the early stages of the pandemic, it clearly gave retailers such as Home Depot, Lowe’s and Tractor Supply a longer boost.”

Are home improvement stocks still a buy? David Keller, chief market strategist at Stock Charts, is cautious in the short term.

“HD is currently down nearly 30% from its all-time high in December 2021, suggesting that inflation and interest rate concerns may already be priced in,” Keller told IBT. “However, the stock remains in an established downtrend and has recently hit a new low for 2022.”

Panos Mourdoukoutas owns shares of Home Depot and Lowe’s.

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