Remodeling Drives Up Lowe's, Home Depot

ATLANTA - The Home Depot sales grew 6.4% third quarter, while its big box competitor Lowe's quarterly sales increased 5%. Both companies will expand next year as they expect the housing boom to continue unabated.

Home Depot's professional customers, especially its largest Pros, account for its greatest growth in sales. The average spend for its Pro customer is $6,600. Ted Decker, EVP of Merchandising, remarked, "We've seen no meaningful change in total average customer spend, but the greatest growth does come from larger PRO customers; we've seen that for the past several quarters now. Managed accounts, the largest spending Pros, grew more than other customers in the third quarter." And the company expects the acceleration in Pro business to continue. It noted that growth among its smaller Pros was hurt by the credit card data breach last year, which also hurt sales among DIY customers.

ARTICLE Taps Facebook Phone App To Connect Homeowners with Pros, a professional finder that competes with Red Beacon from Home Depot, among others, has launched Text-a-Pro, a mobile messaging service that connects homeowners with pros via Facebook’s Messenger app.



The retailer completed its acquisition of Interline brands in the quarter, which is key to Home Depot's strategy to increase Pro business or "expand our share of wallet," as CEO Craig Menear put it. CFO Carol Tome' noted that from a macro perspective there were a billion new households formed in the third quarter, many of those households moving into multi-family units. The Interline transaction gives the company "a great selling vehicle to serve that new household," said Tome'.

Tome' also noted, "Home equity lines of credit (HELOCs) are down 29% from the peak, but 17 million home equity lines have been planned this year. And 28% of banks that underwrite HELOCs have said that their underwriting is starting to ease a bit, but these loans go into big ticket items like kitchen remodels, so it's a bit encouraging as we look at Q4 and beyond."

The Home Depot reported strength in building materials, roofing products, ceiling fans and vanities. The company also saw growth in millwork and lumber sales, but the growth was below the company average. Commodity price deflation in lumber negatively affected average ticket growth -- prices were lower so receipts were lower, but the company said it was "pleased with unit growth in lumber." 

A New Retail Climate

Menear noted that retail business behavior has changed, and the company has responded with its BODFS service, "Buy online, deliver from store." Now available in 108 locations, it will roll out to all stores in 2016. Fully 42% of its online orders are picked up in store, so it's an important initiative.

Comparing Home Depot's DIY and Pro consumers, CFO Decker noted that transactions for tickets under $50 (20% of their business) are down 3.6%, while transactions for tickets over $900 (also 20% of their business) are up 7.8%. So it's easy to see why the company is excited by the acceleration in its largest Pro business customers. The company sees positive signs in housing price appreciation and turnover as being key drivers for their business.

Sales for Lowes Home Improvement Business Up 5%

Home Depot's rival Lowes also reported a strong Third Quarter, with sales up 5%, compared to Q3 last year. The company also sees growth on the horizon as it expects to add 15 to 20 home improvement and hardware stores.

"This is an exciting time for Lowe's as we continue to execute our strategic priorities alongside a favorable macroeconomic backdrop," commented Robert A. Niblock, Lowe's chairman, president and CEO.  "I am pleased that we delivered another solid quarter. Comparable sales growth was driven by gains in both transactions and average ticket, while our focus on productivity and profitability also allowed us to deliver strong earnings per share growth."

"I would like to thank our employees for their purposeful commitment to serving customers, particularly those who worked diligently to assist our neighbors that were impacted by the historic flooding in South Carolina," Niblock added.





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Larry Maloney