DIY slump continues with slashed sales forecasts by Lowe's, Home Depot
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Lowe's just slashed its sales forecast for the year — a move that provides a glimpse into what's happening in a big chunk of the U.S. economy.
Why it matters: The pandemic spurred a boom in home spending as rock-bottom interest rates encouraged people to borrow to pay for DIY projects — but that era is over.
- The company said the sales slump is due to lower-than-expected DIY sales and a "pressured macroeconomic environment."
The big picture: Mortgage rates are falling — and that often spurs more activity in DIY spending — but this time is different as customers are spending elsewhere.
Zoom in: Customers aren't making the type of discretionary big-ticket purchases that Lowe's has historically relied on, and they're "still showing a preference for services versus goods," CFO Brandon Sink said today on an earnings call."
- Flooring, kitchen and bath projects are especially affected, Lowe's executive VP of merchandising William Boltz said on an earnings call.
- The company expects comparable sales to fall 3.5% to 4% this year, worse than its previous estimate of a 2% to 3% decline.
The forecast came a week after the retailer's archrival, Home Depot, made a similar move.
- Home Depot projected its full-year comparable sales would fall 3% to 4%, worse than its previous prediction of 1%.
- The company said that in the second quarter, transactions over $1,000 were down 5.8%, compared with a year earlier.
Threat level: Even if housing activity picks up as interest rates fall, "the sweet spot for DIY spending is 6 months to a year after people have moved," GlobalData analyst Neil Saunders wrote today.
- So "even if housing market activity picks up during the back end of this year, the benefit will not be felt until well into 2025."
