What Lowe’s Booming Sales Say About America’s Housing Market
Higher spending by professional customers gave Lowe’s a big sales boost, as improving housing prices and a warm winter led homeowners to schedule more outdoor projects to invest in their properties.
Lowe’s (LOW) on Wednesday reported fiscal first-quarter results that handily beat Wall Street’s expectations, including a 7.5% increase in same-store sales at U.S. home improvement stores. Overall sales climbed 7.8% to $15.2 billion from $14.1 billion a year earlier. The strong quarter came a day after main rival Home Depot (HD) also issued impressive results.
Both retailers are performing well at a time when many in the sector, in particular those selling apparel, are suffering from sliding demand. Another big-box retailer, Target (TGT), became the latest to report soft quarterly results.
But executives at Lowe’s and Home Depot say continued gains in housing prices and homeowners’ confidence about the future is giving customers more incentive to spend. In some cases, homeowners are still booking projects that they put off since the 2008-2009 financial crisis.
“Spending levels for consumers are relatively the same, but consumers are more likely to spend on a project in and around the home,” Lowe’s Chief Executive Robert Niblock told Fortune. “A lot of those projects they put off during the downturn, they are now coming back and doing them.”
While a warm winter helped boost sales for both home-improvement retailers, what really drove demand were the sector’s professional customers. Those clients visit Lowe’s and Home Depot more often and also spend a lot more than do-it-yourself shoppers. At Lowe’s, 30% of total revenue comes from pros, while at Home Depot, the figure is 40%.
Niblock said the areas of the store that did particularly well during the quarter: tools, lumber, and paint, are all indicative of projects that could be conducted during warmer winter weather.
“Those categories are conducive to the work that those pros would be doing outside,” Niblock said.
He added the Lowe’s has sought to become more relevant to that customer base. One way Lowe’s is doing that is by recently relaunching a pro-focused website called LowesForPros.com. Previously it was information-only, but it is now an e-commerce channel that can be more used broadly.