In the summer months, concerns over the economy and inflation overshadowed the focus on home repairs. The two largest home improvement retailers in the United States, Home Depot and Lowe’s, were apprehensive about fiscal-second-quarter earnings, reflecting broader economic anxieties.
Marvin Ellison, CEO of Lowe’s, highlighted significant economic uncertainties, particularly regarding interest rates and inflation, during an earnings call. Ellison noted that the housing market experienced a lock-in effect, where people were less inclined to move due to higher current mortgage rates compared to their existing ones, leading to historically low housing turnover. Despite positive gains in Pro and online sales, Lowe’s managed through a downturn in DIY demand.
Home Depot CEO Ted Decker echoed similar concerns, citing that higher interest rates and macroeconomic uncertainties had broadly weakened consumer demand, affecting spending on home improvement projects. Additionally, spring projects faced delays due to extreme weather variations. Reflecting on the first half of the year and prevailing consumer demand uncertainty, Decker suggested a cautious sales outlook for the remainder of the year. Billy Bastek, Home Depot’s executive vice president of merchandising, acknowledged that while professionals outperformed DIY customers, both segments saw negative performance for the quarter.
However, there were optimistic signs as well. A July study by the Remodeling Futures Program at Harvard University’s Joint Center for Housing Studies predicted a rise in homeowner expenditures for improvements and repairs through the first half of 2025. The Leading Indicator of Remodeling Activity report anticipated a modest decline in annual spending for renovations and maintenance to owner-occupied homes, projecting a decrease to -0.5% through Q2 2025. According to Carlos Martín, director of the program, economic uncertainties and weak home sales were restricting residential remodeling, although spending drivers were beginning to stabilize.
Abbe Will, associate director of the program, forecasted that annual spending on home improvements and maintenance would reach $466 billion by the second quarter of the next year, consistent with the previous four quarters.
On September 18, the Federal Reserve reduced the Federal Funds Rate by 0.5 percentage points to a range of 4.75% to 5%. This sparked a positive response in the stock market, with Home Depot shares rising nearly 15% year-to-date and 30.2% from the previous year, while Lowe’s stock increased by almost 19% year-to-date and 26% from the prior year.
Mizuho Americas analysts expressed optimism for home-related stocks, expecting a fundamental recovery as the Fed’s easing cycle progressed. They anticipated a gradual pickup in housing activity, which would address significant pent-up demand despite elevated home prices. Mizuho reiterated a Top Pick designation on Lowe’s and maintained favorable views on Home Depot and Wayfair.
On September 24, Oppenheimer analysts adjusted their price targets for both Home Depot and Lowe’s, raising Home Depot’s target to $400 from $345 and upgrading Lowe’s to outperform from perform with a similar price target, suggesting potential gains exceeding 15% from current levels. Oppenheimer’s more optimistic outlook on Lowe’s reflected a discounted share valuation and operational opportunities within the company’s business model.
The investment firm believes that demand trends in home improvement retail will stabilize and return to normal growth patterns as lower lending rates bolster housing activity, support higher home prices, and prompt larger consumer purchases.
