Key Takeaways
- Home Depot and Lowe’s say homeowners have been delaying remodeling projects due to high interest rates.
- The retailers’ earnings this week may show whether affluent customers are resuming renovations.
- Home Depot says its core customers are relatively affluent and resilient to inflationary pressures.
Are affluent Americans still willing to spend? Two major home-improvement retailers could soon provide the answer.
Home Depot (HD) and Lowe’s (LOW) have long relied on customers tackling major projects such as kitchen renovations and bathroom remodels. These homeowners typically have higher incomes and access to financing, but many have held off on spending amid persistently high interest rates.
Home Depot CEO Edward “Ted” Decker noted earlier this year that customers realized rates may not fall anytime soon, prompting some to move forward with projects despite elevated borrowing costs. Investors will get a clearer picture this week: Home Depot is set to release its second-quarter results on Tuesday, while Lowe’s will report on Wednesday.
Home Depot, Lowe’s Same-Store Sales Declines
During the first quarter, both retailers posted year-over-year declines in same-store sales, though Home Depot reported a small uptick in “big-ticket” purchases above $1,000. Appliance sales held up well, while financing-heavy remodeling projects remained under pressure.
Home Depot’s CFO Richard McPhail estimated that higher borrowing costs have cut as much as $50 billion from overall home improvement spending in recent years. Surveys show fewer Americans plan to increase spending on renovations, according to Bank of America.
Still, Home Depot believes its customer base remains strong. With average household incomes of about $110,000, CEO Decker said these shoppers benefit from home price appreciation, wage growth, and stock market gains.
Wall Street Expectations
Despite softer foot traffic, analysts forecast modest growth for both retailers this quarter, according to Visible Alpha estimates:
- Home Depot is expected to report $45.3 billion in sales (up from $43.2 billion last year) and $6.8 billion in adjusted earnings (vs. $6.6 billion last year).
- Lowe’s is projected to deliver $24 billion in sales (slightly above last year’s $23.6 billion) and $3.5 billion in adjusted earnings (vs. $3.4 billion a year ago).
Analysts also anticipate comparable-store sales growth of around 1.1% year-over-year across both companies.
As Wall Street looks ahead, this week’s results will not only reflect the resilience of affluent homeowners but also provide broader insight into U.S. consumer spending amid high rates and economic uncertainty.