Lowe’s and Home Depot get a boost as customers stay-at-home

Photo: Lowe's
May 26, 2020
Tom Ryan

Same-store sales jumped 12.3 percent at Lowe’s and 7.5 percent at Home Depot in their first-quarters as sheltering Americans found time to tackle household projects.

Lowe’s CEO Marvin Ellison said on his company’s conference call last Wednesday that the retailer benefited from the arrival of spring weather in many Western and Southern geographies “as well as a customer mindset that was heavily concentrated on the home.”

He added, “We served broad-based project activity, ranging from outdoor landscaping and other beautification projects to essential indoor repair and maintenance work and long deferred home projects — the to-do list that customers hadn’t previously tackled given their busy schedule.”

Strong sales of cleaning supplies and appliances like refrigerators and freezers were seen directly driven by COVID-19.

The retailers’ digital investments also paid off as online expanded about 80 percent for both. At Home Depot, 60 percent of online orders were completed by curbside pickup. The online growth is supporting new customer acquisition.

Professional contractor sales showed strong gains, but not at the rate of consumer sales as state mandates hampered permit issuance and job site inspections. Households were also reluctant to have workers in their homes for heavy indoor installation categories such as kitchen and bath.

The start of bigger projects as social distancing guidelines are relaxed may provide a boost in coming quarters. Topping the list of desired changes for current homes are more space, updated kitchens and home gyms, according to a survey from realtor.com taken during the first two weeks of April.

Headwinds for home improvement chains include the loss of the initial benefit of stimulus checks. Home sales have also plunged to a nine-year low as unemployment soars. Downturns also typically lead homeowners to shift spending to repairs and upkeep rather than upgrades.

Wedbush analyst Seth Basham wrote in a note, according to MarketWatch, “A quickly rebounding housing market and continued growth of home prices in most areas (especially in suburbs to which many city-dwellers are fleeing) could support demand better than we previously forecast, but the burst in DIY home improvement projects will likely fade as the economy ‘reopens.’”

DISCUSSION QUESTIONS: What factors will be most critical in determining the performance of home improvement retailers in the short- and medium-term? Do you see new opportunities emerging for these types of retailers in serving the needs of homeowners?

Please practice The RetailWire Golden Rule when submitting your comments.
"More time at home combined with a need to make homes as comfortable as possible really helped drive activity."
"Both made investments in distribution prior to COVID-19 being a concern."
"The sugar of stimulus will wear off soon. The bigger headwinds are in reduced new home construction and a dip in home improvements because of the shrinking economy."

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14 Comments on "Lowe’s and Home Depot get a boost as customers stay-at-home"

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Mark Ryski

The pandemic produced both winners and losers – the home improvement category was a clear winner. In the short/mid-term, these retailers need to keep executing the basics well as demand continues to build, as it most certainly will as contractors come back and the economy continues to open.

David Naumann

The impressive same-store sales results of Home Depot and Lowe’s were not surprising as many people were focused on improving the comfort and appearance of their homes while they were staying home. There may be some continued uptick in home improvements for a while as citizens may be spending more time at home during the next of couple years. One of the biggest challenges I experienced at home improvement stores is the long pick time for BOPIS orders. I placed an order for a product that the store had seven in stock and the store indicated that they wouldn’t have it ready for pick-up for 24 to 36 hours. I ended up cancelling the order and picking it off the shelf myself. All stores need to optimize their BOPIS and BOPAC (buy online, pick-up at curb) processes, as customers may switch to a competitor if it isn’t an efficient and pleasant experience.

Suresh Chaganti

I think the article is spot on. The sugar of stimulus will wear off soon. The bigger headwinds are in reduced new home construction and a dip in home improvements because of the shrinking economy. But in the medium term, it depends on whether Q3 shapes up to be a big quarter with a V-shaped recovery.

Bethany Allee

Home Depot offered new curbside service throughout the lockdown. This was key in helping them maintain and grow sales during the pandemic. As restrictions started lifting, they said curbside would no longer be an option.

My local Home Depot said curbside service would end May 15. They were slammed with orders and complaints and Home Depot (at least in my area) recognized the importance of continuing this service as a mid- and potentially long-term option for their customers.

An opportunity is to sell more kitted items. Want to redo your deck? Here’s the kitted recommendation. Looking to start an herb garden? Here’s a pre-set grouping of seeds, soil, containers…

Shep Hyken

Home improvement retailers saw an opportunity to build better relationships with existing customers and forge new ones with new customers. The opportunity moving forward can be described with one word: momentum. The retailers must capitalize on the data they have on the increase in business to keep it going. What are customers buying? Personalize the promotional experience and see how long these numbers can be sustained.

Bob Amster

The pandemic has brought attention to home improvement. When you see the same thing that needs repair day after day after day, you will finally fix it. The sector can’t lose. As to curbside pick-up, let us please not forget that the home improvement business – especially competent independent businesses, had you backing your pick-up truck to a loading bay or dock for the last eight decades. There is little new under the sun; it just looks different.

Lisa Goller

During lockdown, the desire to improve our homes suddenly rocketed up our priority lists. More of us are pursuing renovations to expand our usable space, beautify our homes and even provide productive family projects as a legacy for this era.

Key success factors for home renovation retailers include:

  • Liquidity: Consumers’ disposable income and continued job stability will dictate their ability to invest in their home.
  • The duration of the pandemic: If consumers expect a second wave of COVID-19 this fall, they may use the summer to prepare for more comfortable hibernation and cocooning.
  • New habits: Consumers’ capacity to work from home, which may necessitate new, quiet work spaces for parents and homeschooled children alike.
Neil Saunders

We have a continuous consumer panel looking at home improvement projects and spend. Over the lockdown period, the number of people undertaking various projects jumped sharply. More time at home combined with a need to make homes as comfortable as possible really helped drive activity. As the whole sector is dominated by just two players, those retailers picked up the lion’s share of the benefit.

It is also worth noting that both players have done well digitally. Home Depot has always had a strong online and multichannel offer and Lowe’s has recently invested heavily in this area. That was a major benefit as many consumers went online to service their home improvement needs.

Dan Frechtling

Investment in supply chain is crucial. It’s an enabler for BOPIS, but it’s more than that. Both stores have adapted to increased demand in categories like basic DIY and lawn/garden.

Both made investments in distribution prior to COVID-19 being a concern. Home Depot has built up mechanized Rapid Deployment Centers and new direct fulfillment centers. Lowe’s is spending $1.7 billion on its supply chain, including e-commerce.

If they can continue to replenish inventory, both will take more business from independent hardware stores that lack comparable omnichannel, assortment and stock capabilities.

Stephen Rector

Home Depot and Lowe’s are coming out as two of the winners from this crisis. To spend money on projects around the house that can potentially increase the value of your home versus buying apparel online probably is a better spend of money at the moment. Will this consumer shift be permanent? Time will tell.

Ricardo Belmar
With consumers spending a lot their time at home, the desire to make improvements — even if they have financial concerns going forward — is quite significant as quarterly results prove for both Lowe’s and Home Depot. As states begin re-opening, it’s important for both to maintain their BOPIS and curbside pickup options. Some consumers may wind down their improvement projects, but I expect until homeowners return to their offices, they will continue to be motivated to both fix/repair items around the house and to make improvements both inside and outside their homes. If my neighborhood is any indication, everyone is quite busy sprucing up the look and feel of their yards and interiors. In my home, we’ve started going room by room to define what we’d like to improve to make our daily lives better, both inside and outside. Sometimes that’s as simple of cleaning up and getting reorganized (hello new organization supplies!) and other times it requires buying something new. Many times these are just projects we’ve been delaying over and over in… Read more »
Ananda Chakravarty

Short term: accessibility to stores. Despite the general safety trends, there’re still many close encounters at both Lowe’s and Home Depot and 6 foot rules are hard to enforce. Accessibility includes BOPIS and online product availability as well as market presence. Regionally, the home supply stores are doing well as evidenced by the data Tom shared.

Medium term: Delivery capabilities. Typically, the stores have three delivery options — pickup, ecommerce delivery and direct-from-store delivery (usually through a 3rd party) usually via truck. These have to improve scheduling and ensure that the service can deliver on time. Same-day, 1-2 day, or scheduled delivery needs to be worked out.

We’ll see new opportunities in how delivery, tool rentals and on-site work is set up and executed as DIY turns into larger jobs and contractor jobs.

Craig Sundstrom

The short-term boost “during” was obvious, and easy to predict, but “after”? Assuming we mean in the next few months and not five years from now, it’s tempting to simply extrapolate, but we also need to factor in reduced incomes. Many people will have less to spend, but others may try to save money by DIYing … I’m going to split the difference and predict little/no overall change.

Mark Ryski

I agree, Craig. The unemployment rate is still troubling and it will take some time to recover. According to Mark Zandi of Moody Analytics, it will take years to recover. The encouraging short-term boost in sales no doubt includes a good amount of purchase “shift”…next quarter’s earnings report will be telling.

"More time at home combined with a need to make homes as comfortable as possible really helped drive activity."
"Both made investments in distribution prior to COVID-19 being a concern."
"The sugar of stimulus will wear off soon. The bigger headwinds are in reduced new home construction and a dip in home improvements because of the shrinking economy."

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