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Home improvement retailer Lowe’s (LOW) says appetite for home improvement projects is likely to slow this year, but there’s good reason to expect the downturn to be temporary.
“Based on trends such as a chronic housing shortage, millennials forming households, baby boomers aging, and continued work from home, demand for home renovations will likely increase over time. You can see why we believe that, across homeowners and professionals alike,” Lowe’s CEO Marvin Ellison said on the company’s fiscal fourth quarter earnings call on Tuesday. Told.
Lowe’s reported comparable sales decreased 6.2% in the quarter ended Feb. 2. This is due to continued pressure on do-it-yourself customers to cut back on spending on big-ticket items. Lowe’s expects full-year 2024 comparable sales to decline 2% to 3%.
Sales of previously occupied homes remain at historic lows, mortgage rates continue to hover around 7%, and home prices have not cooled down, leaving many people thinking of moving or selling. It’s staying.
Ellison said the company expects DIY demand to be under pressure in the short term due to these factors. Another part of the equation is the Federal Reserve’s rate cut schedule, which could stimulate the housing market and, in turn, encourage big-ticket purchases at Lowe’s.
“While there is growing confidence in a soft landing, there is still a lot of speculation about the timing of expected rate cuts in the context of slower inflation,” Ellison said. “It is also unclear how quickly consumers will react to these changes and how quickly their consumption habits will change.”
Some Wall Street analysts are not holding their breath that demand for home improvements will rebound this year on the back of rising mortgage rates and fewer new construction projects.
“It won’t be 2024, but probably late 2024,” DA Davidson managing director Michael Baker told Yahoo Finance Live (video above). “But we don’t want to get too ahead of ourselves yet. We believe same-store sales will continue to decline steadily in the first half of this year, and perhaps even further in the second half.”
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