A sluggish housing market and high inflation have hurt businesses at these home improvement product retailers.
Even as the recent earnings from homebuilders soothed some concerns around the persisting sluggishness in the U.S. housing market, results from Home Depot and Lowe’s Companies — major retailers of home improvement products — this week will paint a clearer picture of the consumer demand and inflation impact.
Home Depot is set to release its quarterly report Tuesday, ahead of the market open, while Lowe’s would report a day later.
Home Depot is expected to report a 5% year-over-year (YoY) increase in second-quarter revenue, its lowest in the past four quarters, according to analyst estimates from Koyfin. Lowe’s revenue is expected to rise 1.5%, after nine straight quarters of decline.
In the first quarter, Home Depot missed quarterly profit estimates, while Lowe’s reported results above expectations after raising product prices. Home Depot, which has been trimming its catalog to a smaller number of products, said it would not raise prices yet.
RBC Capital Markets said in a recent note that both retailers are likely to miss Wall Street expectations for comparable sales, with Lowe’s running the risk of cutting its 2025 earnings forecast.
Meanwhile, a July inflation reading that aligned with estimates has raised hopes for an interest rate cut at the Federal Reserve’s September monetary policy meeting. Lower interest rates translate into cheaper mortgages, spurring home sales and lifting housing-related industries.
On Stocktwits, the retail sentiment was ‘extremely bullish’ for Home Depot, and ‘bullish’ for Lowe’s. Their stocks have gained 2.7% and 2.1%, respectively, year-to-date.
In recent weeks, several analysts, including Evercore ISI, JPMorgan, and Jefferies, have raised their price targets on Home Depot stock. The latter two also raised the targets on Lowe’s shares.
Last month, Home Depot announced a $4.3-billion acqusition of GMS, a major building-products distributor, which is planned to be merged with its roofing services unit SRS Distribution.
The move underscores Home Depot’s pivot more towards the so-called Pro customers, such as contractors and other home services professionals.
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