Home improvement retailer Lowe’s (LOW) says appetite for home improvement projects is likely to slow this year, but there’s good reason to expect the downturn to be temporary.
“Factors such as a chronic housing shortage, millennials forming households, aging baby boomers, and continued work from home lead us to believe that demand for home improvement will only increase over time. We see why. Across both homeowners and professionals,” Lowe’s CEO Marvin Ellison said during the company’s fiscal fourth quarter earnings call on Tuesday.
Lowe’s reported comparable sales for the quarter ended Feb. 2 fell 6.2% due to continued pressure from do-it-yourself customers to cut back on spending on big-ticket items. Lowe’s expects full-year 2024 comparable sales to decline 2% to 3%.
Sales of previously occupied homes remain at historic lows, mortgage rates continue to hover around 7%, and home prices have not cooled down, leaving many people thinking of moving or selling. It’s staying.
Ellison said the company expects DIY demand to be under pressure in the short term due to these factors. Another part of this equation is the Federal Reserve’s schedule for rate cuts, which could boost the housing market and result in big purchases at Lowe’s.
“While there is growing confidence in a soft landing, there is still a lot of speculation about the timing of expected rate cuts in the context of slower inflation,” Ellison said. “It is also unclear how quickly consumers will react to these changes and how quickly their consumption habits will change.”
Some Wall Street analysts are not holding their breath that demand for home improvements will rebound this year on the back of rising mortgage rates and fewer new construction projects.
“It won’t be 2024, but probably late 2024,” DA Davidson managing director Michael Baker told Yahoo Finance Live (video above). “But we don’t want to get too ahead of ourselves yet. We believe same-store sales will continue to decline steadily in the first half of this year, and perhaps even further in the second half.”
