As expected, Lowe’s reported a softer Q2 2024 with comparable-store sales down -5.9% with visits down -2.3% (for visits exceeding a 10-minute dwell time). Comparable ticket was up +0.8% compared to Home Depot’s -1.9%, which reflects Lowe's limited exposure to large-project Pros. The -5.9% decrease in comparable transactions shows that the do-it-yourself (DIY) customer continues to be cautious in their spend, as well as the fact that weather was less then favorable (Home Depot reported a similar decline and the category). Lowe’s Executive Vice President of Merchandising Bill Boltz said, “[In hardlines]...unfavorable weather pressured traditional spring seasonal categories like lawn and garden and seasonal and outdoor living. Given our DIY customer mix, sales pressure in these two DIY-dominant categories greatly impacted overall comp sales for the quarter.” Lowe’s also has a 50% larger appliance business than Home Depot (as a % of revenue) and the appliance category has been under substantial pressure for two years with prices now deflationary (-13% per the U.S. Bureau of Economic Analysis Personal Consumption Expenditure Report). For the quarter, Home Depot consistently outperformed in traffic and comp-sales, until July. We suspect that July was when big-project Pros softened for Home Depot and that slowdown is what motivated Home Depot’s management more cautious tone on current business trends on its earnings call.
For Lowe’s, big-project Pros represent less of the business mix, which was part of the reason why Lowe’s reported a mid-single-digit comp-store increase for its Pro business. Reflecting that business mix difference, Lowe’s comparable ticket was up +0.8% versus down -1.3% at Home Depot. For Lowe’s, the decline in business appears to be the number of projects that its DIY customers are undertaking. Lowe’s called out particular softness in the number of transactions in bigger DIY projects, including bath, kitchen, and flooring. Moreover, management shared that this was the weakest part of Lowe’s business. The table below shows year-over-year growth in visitors by frequency for the quarter. Total visitors were flat for the quarter, with visitors visiting 1 time up +1.4%, but visitors coming in more than three times down (the higher frequency customer is 20% of the customer base in a quarter).
We’d expect that when inflation in other parts of the economy recedes, discretionary funds will free up and the number of projects that the DIY customer is interested/ able to do will recover, thus fueling Lowe’s business. (There is no way that homeowners desire to improve their home has structurally eroded; the projects are simply being deferred.) CEO Marvin Ellison said, “The good news is we feel great about our assortment. From a merchandising perspective, we feel great about our pricing, our execution, our marketing. And we believe this is just a macro issue that we're dealing with relative to DIY big-ticket discretionary.” Additionally, Lowe’s just launched a new DIY loyalty program--MyLowe's Rewards--in March. Should that program have efficacy, we’d expect to see an improvement in the frequency levels shown above.
Lowe’s updated guidance for the second half of 2024 calls for comparable-store sales of around -2.6%. However, traffic is showing a notable improvement in August compared to last year and pre-pandemic basis as shown in the chart below. Traffic in Q2 2024 was down -5% versus 2019; that trend has improved +200 basis points.
However, it won’t be until Lowe’s laps the more difficult comparisons of September that the underlying baseline is better understood given that August of 2023 was particularly soft as the second chart demonstrates.
