News

# Home Depot and Lowe’s have 30% share of a home improvement market that’s heading toward $1 trillion

#
Home Depot and Lowe’s have 30% share of a home improvement market that’s heading toward $1 trillion

Home improvement spending jumped during COVID and will likely continue, analysts say

Home Depot Inc. and Lowe’s Cos. are two of the biggest names in all of U.S. retail, but they only have about 30% market share in the category, according to data provided by Bank of America.

Analysts led by Liz Suzuki say Home Depot
HD,
+0.80%
and Lowe’s
LOW,
+1.08%
“command about 17% and 12% market share, respectively, in what remains a relatively fragmented industry.”

The two retailers have notable advantages over smaller competitors, hardware stores and others in the category, including e-commerce capabilities and access to inventory. Bank of America expects the two companies to continue to make gains.

See: Americans are moving, but there’s a ‘notable reversal’ in the types of homes they’re choosing

The home improvement retail category jumped during COVID-19 as consumers invested in making their homes more comfortable and better able to handle the demands of working, playing and much more.

Bank of America estimates that 2020 U.S. home improvement sales, including services, reached $767 billion, “equivalent to about the 20th largest economy in the world.”

Each year, the average U.S. household spends $3,000 on home projects, according to Bank of America data.

Analysts conducted a millennial survey that found that much of the home improvement activity will continue beyond the pandemic. Nearly three-quarters (72%) said they’re likely to buy a home in the next two years.

“As a result of a combination of more time at home, favorable household formation trends, and strong household balance sheets, demand for a wide range of home improvement projects has remained at elevated levels over the last year,” Bank of America said.

Home Depot sales in 2020 totaled $132.1 billion, and Lowe’s rang up $89.6 billion in sales, making them two of the 10 largest retailers in the U.S.

Shares are up 15.6% and 18.8% respectively for the year to date. Both have outpaced the benchmark S&P 500 index SPX, which has gained 12.3% over the period.

Also: Americans are desperate for furniture, but stores are battling inventory problems. Here’s how to score deals

Bank of America identifies a “substantial market opportunity” for the category due to home sales and renovations. Moreover, it’s a category that analysts say is more “consistently profitable.”

In a RBC Capital Markets note published around the group’s Global Consumer and Retail Virtual Conference last week, analysts also forecast continued demand in the home improvement category even as consumers head back out for parties, work, restaurant dining and vacations.

“Across the presenting companies, management teams called out the lasting effects the pandemic on consumer behaviors leading to more time at home and the potential for structurally higher demand going forward,” RBC wrote.

“From Spectrum’s Home & Garden business to Clorox’s Kingsford grilling business, consumers have been investing in their homes and that is unlikely to dissipate with reopening.”

RBC rates Home Depot shares outperform. While some may be concerned about “over heating,” RBC says there are notable differences between the home market of today the one from the mid-2000s.

Watch: Which sectors stand to win or lose as inflation creeps up

“Home equity levels are at all- time highs, consumer balance sheets and confidence levels are strong and speculation (a key driver to the excesses in the 2000s) is relatively low, given significant changes to the financing part of the mortgage market. We also note that home equity usage has essentially dropped for almost 10 years straight, suggesting that consumers have continued to deleverage,” analysts said.

“Rather, today’s price appreciation is being driven by good old supply/demand factors.”

If you liked the article, do not forget to share it with your friends. Follow us on Google News too, click on the star and choose us from your favorites.

For forums sites go to Forum.BuradaBiliyorum.Com

If you want to read more News articles, you can visit our News category.

Source

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close

Please allow ads on our site

Please consider supporting us by disabling your ad blocker!