DIY Boomed During Pandemic

Hello reader! My name is Nicolas Lau and I’m the newest researcher on the JLL Retail Research team. I never thought of myself as ever being a handy person. But when my garbage disposal broke during the pandemic lockdown I decided to replace it myself. Thanks to the tutelage of a YouTube video and materials from my local Home Depot, I was able to replace it.

I was not the only person engaged in home projects at that time. The pandemic prompted many people to make home improvements. Home improvement store sales saw significant growth through 2020 and 2021, according to data from IBISWorld. People had more time on their hands; time which could be spent on long overdue home projects.

US Home Improvement Stores Annual Change in Revenue

Rising mortgage rates cool the housing market

The Federal Reserve raising rates as a response to inflation prompted a 136.8 percent year-over-year increase in October mortgage rates, to a staggering 7.08 percent. Overall, new housing permits have cooled while housing starts for single-family homes have fallen about 19 percent year-over-year. Buyers are pulling back too; PulteGroup reported a 24 percent cancellation rate for the third quarter of this year. With fewer shopping trips by new homeowners, how big an impact will this be on home improvement stores?

US 30 Year Fixed Rate Mortgage Average

Home Depot outperforms by catering to professionals

Home Depot reported strong quarterly earnings for Q2. In fact, it posted the highest quarterly sales and earnings in the company’s history. Net earnings for the second quarter of 2022 were reported at 5.2 billion, a 7.61 percent year-over-year increase. Despite the number of customer transactions falling to 3 percent, the spending amount per transaction rose 9.1 percent.

Home Depot has invested heavily to appeal to home professionals through its delivery centers. These delivery centers streamline the transport of heavy and bulky products to consumers. In addition, Home Depot offers Pro Xtra, a loyalty program that offers personalized discounts and rewards for items that are exclusive to professionals.

Home Depot Store Count (2018-2022)

Lowes makes moves on professionals too

Lowe’s growth has remained slower in comparison to its rival, Home Depot. Lowe’s saw a 0.86 percent year-over-year decrease in net earnings for 2022 Q2. Home Depot has had the upper hand in catering to trade professionals and private contractors. To combat this, Lowe’s added MVPs Pro Rewards to its “Lowe’s for Pro’s” program and Total Home Strategy. These programs and plans are Lowe’s solutions to enhance customer engagement and increase loyalty from professional contractors.

Lowe’s Store Count (2018-2022)

Floor & Décor to expand store footprint by 20 percent

Similar to Home Depot, Floor & Décor had a strong second quarter. The chain is planning for a 20 percent increase in sales and warehouse format stores over the next three years. Physical store openings are expected to expand long term as well, with the company planning to open as many as 500 new units over the next 8 to 10 years. 

Floor & Decor Total Store Count

Home Improvement heads into uncertainty

Pesky inflation, higher interest rates, and household consumer prices continue to increase in 2022, presenting home improvement retailers with foreseeable headwinds. We’ll only know how well they fare in mid-November when Q3 earnings for Home Depot and Lowes are released. While these retailers are going through these uncertain times, all I know for certain is that with the millions of DIY YouTube videos, there will never be a shortage of home improvement projects one can make in the future.