November 30, 2022

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Carefully Crafted home

No Slowdown in Consumer Spending on the Home

Restaurants are filling up again and airports are seeing increased traffic, but consumers aren’t slowing down their home improvement projects as real estate sales continue to rise and working from home remains the norm for many workers.

In separate earnings reports this week, executives at The Home Depot and Lowe’s said sales are continuing to grow versus 2020 despite the record spending seen last year. Marvin Ellison, president and CEO of Lowe’s, said, for example, that comparable sales in the U.S. grew by 2.6% in the third quarter on top of 30% growth in the same period last year, amounting to nearly 34% growth on a two-year stack.

Craig Menear, chairman and CEO of The Home Depot, told analysts that his company has also seen consumers starting to take on larger projects, and professionals have told the retailer that their backlogs are still months long.

“Candidly, we had expected that as the year progressed, you might see customers reverting back and spending in other areas,” Menear said. “And that may have affected us, but we really haven’t seen that.”

The Home Depot has also seen an acceleration of demand in October, Chief Financial Officer Richard McPhail said, with improvement in both number and size of transactions sequentially from September to October. “So, we think that’s a sign that the customer is engaged and demand is healthy,” he said.

Amid the pandemic and its related lockdowns, consumers spent in droves to update and refurnish their homes as the space was redefined and new connections were made. Though slowing furniture sales earlier this year suggested this nesting trend could be coming to an end, continued sales strength at home improvement stores says otherwise.

Related: From Beds To Bird Feeders: Expanding Home Improvement Category Extends Nesting Trend 

Additionally, the pandemic led many people to reconsider how much space they really need, either downsizing or upgrading their homes and therefore requiring more furniture, décor and appliances, as well as perhaps a few other improvements. Zillow projected earlier this week that existing home sales will top 6.1 million this year, up 8.5% from 2020.

Catering to the Pros 

Though do-it-yourself home improvement sales are still up, Mennear and Ellison both said sales to professional are outpacing general consumer demand, with Lowe’s and The Home Depot each working to cater to that subset of customers.

Home Depot recently launched a B2B website, professional loyalty program and dedicated app, which Chief Operating Officer Ted Decker said is seeing “record traffic.” Basket sizes and engagement amount the professional base is also growing, he said, as the retailer puts “heavy emphasis” on its digital capabilities.

“Our pro customers, because they’re engaging with us at a much higher frequency than the average consumer, we’re able to stitch all that behavior together in a much more robust understanding of that customer,” Decker said.

Lowe’s, on the other hand, has had more basic work to do to engage the professional community, such as reestablishing the number of national brands available, something the retailer had previously diluted because of an emphasis on proprietary brands that are not as popular with pros, and allowing professionals to checkout at a dedicated help desk.

Ellison said the company is now focused on building out its pro loyalty platform, as well as a dedicated fulfillment platform.

“The foundation is in place,” he said. “We just have to earn the pros’ trust and respect, because for so many years they would show up, service was terrible, we were out of stock, and we couldn’t allow them to get in and out quickly or grow their business.”

See also: Lowe’s, Home Depot Court Big-Spending Pro Contractors As DIY Takes A Breather

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NEW PYMNTS DATA: THE 2021 HOLIDAY SHOPPING OUTLOOK

About: It’s almost go time for the holiday shopping season, and nearly 90% of U.S. consumers plan to make at least some of their purchases online — 13% more than did in 2020. The 2021 Holiday Shopping Outlook, PYMNTS surveyed more than 3,600 consumers to learn what is driving online sales this holiday season and the impact of product availability and personalized rewards on merchant preference.