Yahoo Finance DIYers get thrifty on home improvement projects, Lowe's execs say
Americans are cutting back ambitions on their do-it-yourself home makeovers.
That's the gist from Lowe's (LOW) executives describing the retailer's first-quarter results, which were impacted by customers growing more price-conscious.
"Candidly, what we're seeing is pressure across big-ticket discretionary purchases primarily," Marvin Ellison, president and CEO, said on the company's earnings call Tuesday. "We're seeing some pressure in small ticket [items], but it's more pronounced in big ticket [items] and is almost exclusively discretionary in DIY."
Comparable sales fell 4.3% at Lowe's in the most recent quarter, driven by weaker consumer demand. Customers also spent less per ticket, down 0.3% for the first quarter. On a monthly basis, comparable sales were lower by 3% in February, down by 5.4% in March, and off 3.9% in April — the latter two months hit hard by bad weather. Lumber deflation also played a role in the drop in sales.
Similar to earnings from Home Depot last week, the results again show the go-go years of home improvement spurred by the pandemic have ebbed as DIY-ers, who make up three-quarters of Lowe's clientele, downsize or down-price their plans.
Lowe's execs recognized that pivot in the quarter and, in response, launched new products to meet those needs.
For instance, it offered new closet organization systems across four private brands with choices ranging from pricier to more economical, including modular, easy-to-install wood, and wire systems, according to William Boltz, executive vice president of merchandising.
"Our private brand strategy allows us to deliver value to DIY customers who are looking for high-quality, on-trend products at more affordable price points," Boltz said on the call, "which enables us to provide differentiation, loyalty, and profitability."
Data from John Burns Research and Consulting also shows that remodeling customers are shifting away from high-grade products to lower-cost finishes and fixtures. About 29% moved in that direction in the first quarter of this year, up from the six previous quarters.
"There's a bit of sticker shock, that's one side of it," Eric Finnigan, a vice president for John Burns Research and Consulting, told Yahoo Finance. The other side is that customers are "prioritizing budget more than anything else."
Data from the National Kitchen & Bath Association also raised similar insights from professionals, who are focused on lower-priced product solutions and small projects given a less robust macro backdrop.
"The consumer is still in a situation where you have this high equity, limited home inventory, and they're locked into these rates. So where do you spend the money? Kitchen and bath," Bill Darcy, CEO of National Kitchen & Bath Association, told Yahoo Finance. "It's being creative with the higher prices that they're dealing with."
One segment of home improvement, though, is still chugging along, according to Finnigan.
"The replacement segment hasn;t really shown any signs of slowing down," Finnigan said. People still need roof replacements or need to replace their central air unit. Customers are still moving ahead with those projects and "remodelers are effectively booked out still months in advance."
But that's not enough to offset the overall remodeling slowdown, and Lowe's cut its outlook in response to this environment. The company now expects full-year sales between $87 billion and $89 billion, down from its previous forecast of $88 billion to $90 billion. Comparable sales are likely to be 2% to 4% lower.
"Given the higher-than-expected pullback we've seen in home improvement spending, we are now expecting our relevant market, which reflects our 75% DIY, 25% Pro mix to be down mid-single digits this year," Lowe's CFO Brandon Sink said on the call with analysts.
"But while we are seeing lower-than-expected DIY discretionary demand, we are also driving better-than-expected results in Pro and continued strength in our online sales and core categories like appliances and paint. This reinforces our confidence that we will continue to take market share and outperform the broader market," he added.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv
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