Now that fall is right around the corner, Home Depot and Lowe’s are expected to get busier as shoppers stock up on twinkle lights, 12-foot skeletons, garden scarecrows, and inflatable Santas. And based on recent earnings calls, both home improvement retailers could use the financial boost. During their second-quarter earnings calls, Home Depot and Lowe’s announced that their full-year forecast sales were not what they hoped for. While both retailers surpassed quarterly earnings and revenue expectations, they’re preparing for a staggering drop in sales for the latter half of 2024.
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Speaking with CNBC, Home Depot said its comparable sales are expected to drop by three to four percent—originally, that statistic was set at a one percent decline. This doesn’t account for store openings, closures, and other one-time factors, the outlet noted.
A week later, Lowe’s told a similar story to CNBC. The company has adjusted its projected total sales for 2024 from “between $84 billion and $85 billion” to “between $82.7 billion and $83.2 billion.” Additionally, Lowe’s estimates that comparable sales will fall by 3.5 to four percent, which is nearly double than previous numbers.
So, where have shoppers disappeared to? According to Home Depot and Lowe’s, the Federal Reserve is to blame.
“Inflation remains high,” Lowe’s CEO Marvin Ellison told CNBC. “And big-ticket purchases are being delayed as customers sit back and wait for interest rates to fall.”
Home Depot CFO Richard McPhail agreed, explaining that big-budget renovation projects have been put on the back burner due to climbing interest rates. As a result, home improvement stores like Home Depot are suffering.
“What our customers tell their pros is, ‘Everything I read tells me interest rates will be lower in three to six months,’” McPhail told CNBC. ”‘Why would I borrow to finance the project now rather than just wait a few months?’”
Home Depot CEO Ted Decker explained that a similar trajectory occurred when mortgage rates dipped in 2023, and the company saw “an immediate increase in housing activity.” That said, Decker admitted he doesn’t have the “magical rate number” in mind that Home Depot would need for the scales to tip in their favor.
Meanwhile, Lowe’s plans to continue expanding its online business and partnerships with home professionals such as contractors and electricians, which have proven fruitful this year. Ellison told CNBC that comparable sales in this sector are on the up, and online sales increased by 2.9 percent.
During a July 2024 press conference, Federal Reserve Chair Jerome Powell teased that a rate cut is “on the table” for September. But alas, only time will tell.