As Lowe’s and Home Depot focus on growing the ranks of professional customers as a strategy to boost the bottom line, both retailers ended Q4 on a mostly positive note, a sign the home improvement sector may be rebounding.
The Home Depot on Tuesday posted positive quarterly comparable sales for the first time in two years. Comps for the holiday quarter were up 0.8% overall and 1.3% in the U.S. The comp growth marked "a very clear win for Home Depot, and it suggests that the home improvement market as a whole might finally be reaching the nadir of its more sluggish performance," GlobalData Managing Director Neil Saunders said in emailed comments.
The retailer reported net sales during the 14 weeks of its fourth quarter hit $39.7 billion, a 14% increase compared to the year-ago period when there were 13 weeks in the quarter. Profits grew during the period, with operating income growing 8.5% year over year to $4.5 billion and net income increasing 7% to about $3 billion.
For the full year, net sales rose 4.5% to $159.5 billion from the prior year, although comparable sales declined 1.8% both overall and in the U.S. Operating income was nearly flat at $21.5 billion, while net income fell 2.2% to $14.8 billion.
Home Depot CEO Ted Decker said its purchase of SRS — which it acquired in June — has contributed $6.4 billion in sales since then.
The retailer is also gaining ground with its pro customers. All pro cohorts saw positive comps during the fourth quarter, according to Ann-Marie Campbell, Home Depot’s senior executive vice president of U.S. stores and operations.
Following shortly after, rival home improvement retailer Lowe’s on Wednesday reported fourth-quarter net sales were nearly flat year over year at $18.6 billion. Comp sales inched up 0.2%, driven by high-single-digit pro and online comps, holiday performance and hurricane rebuilding efforts, offset by ongoing pressure in discretionary spending by DIYers.
“Even though short-term interest rates have started to come down, this remains a challenging home improvement market,” Lowe’s CEO Marvin Ellison said during a Wednesday earnings call. “Mortgage rates are higher than they've been in more than two decades, creating a significant gap between today's rates for home buyers and the lower rates many homeowners currently enjoy.”
Operating income in Q4 grew 8.5% year over year to $1.8 billion, while net income during the period increased 10.3% to $1.1 billion.
For the full year, Lowe’s reported net sales of $83.7 billion, a 3% decline from the prior year. Operating income fell 9.4% to $10.5 billion and net income declined about 10% to $7 billion.
Despite ongoing challenges, Ellison was bullish on the long-term outlook for the business, pointing to home price appreciation, disposable personal income growth rising faster than inflation and the oldest existing housing stock in U.S. history. Together, Ellison forecast those factors would sustain long-term demand as homeowners tap into equity to invest in major repair and upgrade projects.
Both Lowe's and Home Depot "have solid strategies to drive their businesses," Telsey Advisory Group analysts, led by Joe Feldman, said in a Wednesday note. “Lowe's should remain a long-term share gainer and benefit from its Total Home strategy — strengthening merchandising and space productivity, leveraging technology, broadening the omnichannel model, and expanding the pro business.”
Last week, Lowe’s updated its professional contractor loyalty program. The changes refocus the program toward small- and mid-sized contractors to make it easier to earn and redeem rewards.
Lowe's Executive Vice President of Stores Joe MacFarland said both its pro and DIY customer loyalty programs run on the same tech platform, which he said should increase customer engagement and drive repeat purchases.
Looking ahead, analysts describe both Home Depot’s and Lowe’s outlooks as cautious. Home Depot projects total sales to grow about 2.8% year over year and comps to grow 1%. It expects to open 13 new stores during the year. Meanwhile, Lowe’s forecasts total sales to be between $83.5 billion and $84.5 billion, about flat to up 1%, with comps also flat to up 1%.
“The home improvement market might have reached the bottom of its long period of decline, but we do not believe the recovery will be a straight upward line,” Saunders said. “There are too many pressures on the market, including elevated interest rates and potentially higher prices from tariffs, to guarantee such stability.”
