THE CEO of Lowe’s has issued a warning about the future after the brand saw a slump over the past year.
Consumer appeal for home improvement has been stagnant recently but the trend may only be temporary.
“When you hear these factors with trends, like chronic undersupply of homes, millennial household formation, baby boomers aging in place, and a sustained number of people working from home,” said Lowe’s CEO Marvin Ellison on the company’s fourth-quarter earnings call on Tuesday.
“You can see why we are confident that home improvement demand will trend upwards over time across both homeowners and pros.”
Lowe’s reported sales were down 6.2% in the quarter that ended on February 2 as customers are holding off on spending on big-ticket items for DIY projects.
The brand has predicted sales will be down by 2 to 3% for the 2024 year.
Sales of previously occupied homes are at an all-time low with mortgage rates hovering around 7% and prices on homes remaining stagnant – the perfect storm that keeps many from moving or selling their homes.
Ellison said that due to these factors, the company is expecting DIY demand to be on the lower end in the near future.
The Federal Reserve’s interest rates have the potential to boost the housing market, which could mean more big-ticket sales at Lowe’s.
“While there is increased confidence of a soft landing, there’s still a lot of speculation on the timing of anticipated interest rate cuts in the face of slowing inflation,” said Ellison.
“It’s also unclear how quickly the consumer will react to these changes and how quickly their spending habits will change.”
But financial experts aren’t holding out too much hope over the possible bounce back for the home improvement market as mortgage rates continue to rise.
“Not 2024, maybe the second half of 2024,” Michael Baker, managing director of D.A. Davidson, told Yahoo Finance Live.
“But we don’t want to sort of get too far ahead of ourselves yet. We think same-store sales will continue down certainly for the first half of the year and probably even further in the second half of the year.”
However, Baker said there is still a bit to go on housing recovery.
“Getting better, but we’re not looking for a positive until maybe early 2025,” he said.
Home Depot, Lowe’s biggest competitor, said it had a “neutral” outlook on the housing market in 2024.
“We don’t think there’s incremental pressure nor do we think that we’re quite ready for a hockey stick recovery,” said CEO Edward Decker on an earnings call.
