Home Improvement Retailers Hammered by Cautious Customers
Home improvement retailers have plenty of power tools but can’t fix a sector-wide slump. Following a pandemic boom in DIY and renovation projects, homeowners are putting off major makeovers. High interest rates and a tight housing market have pushed LL Flooring into bankruptcy, while home goods companies Home Depot and Wayfair report sliding sales.
- Home Depot’s Q2 earnings now predict a 3% to 4% decline in full-year comparable sales, a sharp drop from the previously forecasted 1% decrease.
- Homeowners are adopting a “deferral mindset,” as Home Depot’s CFO noted, questioning, “Why would [they] borrow to finance the project now rather than just wait a few months?”
Money printer savior: The sector desperately awaits a Fed rate cut, believing it will boost sales by encouraging Americans to move, and renovate their new homes with cheaper debt. Home Depot’s CEO mentioned a “golden handcuffs dynamic,” where homeowners with low rates hesitate to move. He believes a 6.5% market mortgage rate could spur more moving and spending, matching the average 30-year fixed rate. The sector hopes a Fed rate cut will renovate home improvement retailer fortunes — or will they need more to nail down dwindling consumer confidence?
