• by Sarah Mahoney , 4 hours ago

American consumers continue to wrestle with overstretched budgets, and Home Depot and Lowe’s are feeling the pinch. While Lowe’s has fared a bit better, beating expectations and winning some professional competitors away from its big orange rival, neither retailer expects much improvement in the months ahead.

At Home Depot, sales for the fiscal fourth quarter fell 3.8% to $38.2 billion, with some of that decline attributable to a calendar adjustment that reduced the most recent quarter by one week. Comparable sales for the quarter rose a scant 0.4%, and in the U.S., increased just 0.3%. Net earnings dropped to $2.6 billion, compared with $3 billion in the year-ago period.

And it reiterated its forecast for the full year ahead, expecting sales to range from flat to a 2% gain, citing the many struggles hamstringing the housing market: significant increases in home prices since 2019, combined with housing turnover at historical lows since 2023, are reducing demand for home improvement projects. “Our customers also tell us they have concerns over general economic uncertainty, including inflation, growing job concerns and higher financing costs,” said Richard McPhail, the retailer’s CFO, in an earnings call. “We anticipate these pressures will persist.”

Morningstar’s Jaime M. Katz writes that while this is the third year of a stalled housing market, “key drivers of home improvement spending, including home prices and turnover, remain muted.” Still, she thinks Home Depot is positioned to take share, even in a difficult environment. “The firm remains focused on removing friction for its consumers across issues like order management, delivery, and communication, which should bolster its brand intangible asset.”

Lowe’s fared better than expected, with comparable sales up 1.3%. For the fourth quarter, total revenue rose to $20.6 billion, up from $18.6 billion in the prior-year quarter. Net earnings slipped to $999 million, from $1.13 billion a year ago. And it, too, forecasts an underwhelming year ahead, predicting a sales gain of between flat and 2%.

Lowe’s, too, remarked on the “persistent volatility” in the housing sector. “This uncertainty continues to pressure big-ticket, discretionary DIY projects, as many consumers are reluctant to make significant investments in their homes,” said Marvin R. Ellison, Lowe's chairman, president and CEO, on its earnings call. He confirmed layoffs of about 1% of its workforce earlier this month. “Although these are difficult decisions to make, this workforce reduction will help us create greater financial agility within our dynamic industry while continuing to invest in customer-facing areas of the company.”

A significant bright spot for Lowe’s, writes Neil Saunders, managing director of GlobalData, is that Lowe’s gains this quarter stem from the continued addition of pro consumers to the business. And while Home Depot still dominates among high-spending construction professionals, “Lowe’s has carved out more significant market share in the small and medium pro space – including taking some business away from Home Depot. This segment is robust because, while bigger work like full remodels might be down, tradespeople have been pivoting to smaller decorative projects.”