When mortgage rates become too high for anyone to buy a home or refinance their mortgage, people also stop grouting, painting, tiling, and other DIY renovations that are necessary to sell a home.
This is causing real pain for retailers. Lowe’s Reported The company said Wednesday that same-store sales fell 5.1% in the second quarter ending in early August. The company now expects retail sales to fall 3.5% to 4% this year, up from a previous forecast of a 2% to 3% decline. The slowdown in Lowe’s DIY business mirrors that of rival Home Depot, which sharply cut its sales outlook after weak second-quarter sales. The company now expects same-store sales to fall 3% to 4% this year, a tough outlook for the company. Largest Retailer The world’s largest home improvement and construction supplies company saw its sales fall from a year ago, compared with an earlier forecast of a 1% decline.
Lowe’s and Home Depot, which have more than 4,000 stores across the U.S., said they expect the expected interest rate cuts will help customers save money. Warm up again I finally came up with the idea to wear protective goggles and gloves to redo the countertops.
“We all know we’re in a situation where interest rates are rising and inflation is rising,” Lowe’s CEO Marvin Ellison said, “so the DIY customer is just sitting on the sidelines, waiting for some kind of change to happen.”
It is true that mortgage interest rates have fallen to their lowest level in a year, but we hope that temporary relief for home improvement stores will come soon. Usually peak Neil Saunders, managing director of retail at GlobalData, said that six months to a year after moving, amateur renovation projects could be put on hold until 2025. The trend is mirrored by the Joint Center for Housing Studies at Harvard University. project Home repair costs are set to steadily increase going into next year.
So Ellison attributes the sales slump largely to declining interest in big discretionary purchases like replacing kitchens, bathrooms and flooring — a continuation of a trend seen late last year. Bad weather was also to blame, he said, with “rainy May followed closely by scorching heat in June and July for much of the country,” which disrupted the usual spring and summer purchases of patio furniture and lawn care.
“We’re still about 75% DIY, so cuts in those big-ticket discretionary categories have a disproportionate impact on us,” Ellison said on the earnings conference call.
Home Depot echoed that sentiment: “During the quarter, rising interest rates and increased macroeconomic uncertainty weighed on broader consumer demand, resulting in lower spending on home improvement projects overall,” said Ted Decker, chairman, president and CEO.
With home prices hitting a 20-year high, would-be home buyers are effectively locked out of the market. Fewer new homeowners mean fewer opportunities to renovate, but the home improvement industry could suffer a double whammy from a lock-in effect. Sellers enjoying ultra-low mortgage rates due to the pandemic are less interested in putting their homes on the market. Loss of motivation The opportunity to complete last-minute projects before putting a home on the market will also be gone, another blow to DIYers.
Turning Procrastinators into Professional Contractors
Lowe’s and Home Depot have avoided the waiting game by becoming havens for professional contractors. Home Depot CEO Decker said earlier this year: Target Market Contractor sales could swell to $250 billion. Professional contractors make up about half of the retailer’s customer base. Until March, the company had been focused on developing a “pro ecosystem.” Acquisition of SRS DistributionThis will expand our distribution network and increase our ability to carry professional grade stock.
Lowe’s, which has made a similar shift to selling to contractors through loyalty programs and delivery orders to remodeling sites, is already seeing the benefits of its investments: A quarterly decline was offset by a mid-single-digit increase in same-store sales and a 2.9% increase in online pro sales.
“One thing we can say for sure is that our pro business is growing,” Ellison said.
And Ellison believes Lowe’s can weather this crisis until homeowners are ready to pick up power tools again.
“While it is not possible to predict when home renovations will recover, we are confident we are in a strong position to gain share once the market begins to improve,” he said.
