The spectacular financial results put up this week by both Home Depot and Lowe’s say a lot about where American retailing — and the overall economy — is headed.
Both stores had impressive number stories to tell. Each reported huge same store sales — Depot up 23.4% and Lowe’s up 34.2% — with significant gains overall on both the top and bottom lines. Coming on top of equally as strong news from Walmart and Target, the home improvement twin’s numbers reinforce and confirm several broad trends within the retailing sector:
• The entire home products sector may be the strongest part of the overall American economy right now. From home improvement to home furnishings to home sales themselves, anything to do with home is feeling the consumer love right now. Obviously, the stay-at-home movement, the lack of spending on apparel, travel and dining out are all contributing to what may turn out to be an unprecedented spurt for the sector. As the fallout from the pandemic shows no signs of any significant decline for the foreseeable future it stands to reason that anything to do with home will continue to prosper.
• Jim Cramer of CNBC called it the greatest wealth transfer in American retailing history and that is clearly true as big dominant retailers continue to put up significant gains in sales and profits, often at the expense of smaller stores. Stores like Depot and Lowe’s — as well as Walmart and Target — were largely allowed to stay open during the spring pandemic shutdown and they accumulated large increases in revenue and market share, a trend that doesn’t appear to be letting up with the reopening of most of retail across the country. Shoppers got into the habit of buying, not just essentials but pretty much everything, at these stores and that will be a new tendency difficult to disrupt. This is a fundamental shift in the retail market share pie and it’s going to be long lived.
• Lastly, reports of the death of physical retailing remain wildly inaccurate. Even as so many marginal operations enter bankruptcy and are often liquidated — Penney and J. Crew among the former and Stein Mart and Pier 1 some of the latter — the strongest retailers are only getting stronger. This is across the board, their physical stores doing as well as their e-commerce businesses, each one playing off the other and presenting a comprehensive and interconnected solution for shoppers. Only those retailing companies that can offer both sides of the shopping equation will ultimately succeed: Amazon, Wayfair, TJX and Ross, take note.
But it’s the strength of anything home-related that is the most compelling take-away from this week’s numbers. “Home is going to continue to be a winner,” Telsey Advisory Group CEO and chief research officer Dana Telsey told CNBC on Tuesday. “It’s an office, an exercise center, an entertainment and now an education center also. I think consumers are basically re-investing in the remodels of their homes for a prolonged period of time.”