Home improvement retailer Lowe’s is experiencing significant challenges as consumer spending continues to decline, according to their latest quarterly earnings report. The company reported a 1% decrease in comparable sales year-over-year for the third quarter of 2024, while foot traffic dropped approximately 4% compared to the same period last year, based on data from Placer.ai.
The retailer’s performance trails behind its primary competitor Home Depot, which captured 29% of home improvement and furnishing chain visits nationwide during the third quarter, while Lowe’s secured only 21%. These declining metrics have resulted in a 4.6% reduction in Lowe’s net earnings compared to the previous year.
During a November 19 earnings call, Lowe’s CEO Marvin Ellison addressed the underlying causes of these challenges. Despite recent interest rate reductions, consumers continue to face economic pressures affecting their spending habits. Ellison highlighted that persistently high mortgage rates, currently exceeding 6%, combined with inflation, are creating affordability challenges for customers. He noted that more than half of existing mortgage rates are below 4%, contributing to near 30-year lows in housing turnover.
The impact is particularly evident in consumer behavior regarding home improvement projects. Customers are increasingly reluctant to invest in major renovations such as kitchen, bathroom, flooring, and decor updates. Instead, they’re focusing on smaller-scale outdoor projects. This trend aligns with recent U.S. News survey findings, which indicate that 42% of homeowners are limiting themselves to minor improvements like painting and landscaping, while only 30% are undertaking full renovations. Furthermore, 43% of homeowners report relying solely on savings to fund these projects.
Despite these challenges, Lowe’s leadership identifies three potential catalysts for future growth. First, rising home values could encourage more property listings. Second, disposable personal income is growing faster than inflation. Third, the median age of U.S. homes has reached a historic high of 41 years, potentially necessitating more repairs and renovations.
Ellison expressed optimism about long-term demand, particularly as interest rates eventually ease. He pointed to the potential for homeowners to leverage the estimated $35 trillion in home equity to finance larger improvement projects. Additional factors expected to drive future demand include the continuation of remote work, millennial household formation, and aging Baby Boomers choosing to remain in their homes.
The company is implementing strategies to attract budget-conscious customers, having observed increased engagement during promotional events like Labor Day and MyLowe’s Rewards Week. Bill Boltz, Lowe’s Merchandising Executive Vice President, emphasized their multi-faceted approach to providing value, noting that customer benefits can come through competitive pricing, product innovation, or a combination of both.
This difficult period for Lowe’s reflects broader economic challenges affecting the home improvement sector, as consumers carefully manage their spending amid persistent inflation and high interest rates. While immediate consumer spending remains constrained, the company’s leadership maintains a positive outlook based on fundamental housing market factors and demographic trends that could support future growth in home improvement demand.