Solid Lowe's, Home Depot Results Show America's DIY Army Hangs Tough

Financial results at both retailers are stronger than expected, showing remarkable resilience despite the choppy housing market.

As inflation cuts into family budgets and the housing market loses steam, it’s been easy to expect these factors to translate into bad news for home-improvement stores.

But both Lowe’s and Home Depot reported numbers that beat expectations, with plenty of evidence that even amid inflation, people are willing to spend to make their homes a little homier.

The Home Depot says sales in its fiscal third quarter rose 5.6% to $38.9 billion, with comparable domestic sales increasing 4.3%. The Atlanta-based retailer’s net earnings advanced to $4.3 billion, compared with $4.1 billion in the comparable period last year.

And at Lowe’s, third-quarter revenues climbed to $23.5 billion, compared to $22.9 billion in the year-ago period. Comparable sales in the U.S. grew by 3%. Net income sank to $154 million, compared to $1.89 billion in the third quarter of 2021. The shift reflects a $2.1 billion impairment charge for its Canadian retail operations.



The Mooresville, North Carolina-based company is increasing the outlook for the full year and anticipates sales of between $97 billion and $98 billion.

Still, analysts see plenty of pitfalls ahead. According to Seth Basham, an analyst who follows Home Depot for Wedbush Securities, the retailer's sales reflect slowing demand for home improvement projects, particularly in big-ticket purchases. And sales of appliances, flooring and indoor garden items are all decelerating.

And while Home Depot “remains confident in its ability to gain market share no matter what type of environment it may face…we see likelihood for housing-related headwinds on the back of sharply rising mortgage rates,” he says. He continues to give the company a neutral rating.

And while Baird is more bullish on Home Depot’s prospects, it sees bumps ahead. “Project demand remains strong, but the continued decline in transactions and negative comparable sales across certain parts of the store will add to the cyclical risk debate,” writes Peter Benedict, who follows the company for Baird.

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