Thanks to President Trump, the word “confidence” is creeping back into the lexicon of American businesses as many companies start seeing an uptick in sales and revenue in their third quarter earnings reports. The home improvement industry is one of those businesses currently gaining a boost from Trump’s policies as people now seek better jobs, better lives and better living conditions.
A Reuters poll in May showed that the U.S. is currently experiencing a chronic shortage of homes, which is one of the reasons the housing market is seeing a surge and American construction companies are getting so much work that they can’t hire enough people to do it.
Other retailers may be feeling the bite of online competition, but when it comes to the home repair business, Americans are shopping for do-it-yourself items like never before. In fact, home improvement retail giants Home Depot and Lowe’s have both reported increased sales for the first quarter of 2017, which is likely a direct result of the shortage of new single-family houses in the market, some experts say.
Instead of moving, an increasing number of homeowners are opting to build additions to their existing houses or put their money into major home-improvement projects. According to the Harvard University Joint Center for Housing Studies, American consumers will spend a record $316 billion on remodeling their homes this year, which is up from last year’s $296 billion spent on home improvement, and the $222 billion spent in 2009 amid the Great Recession.
“Home improvement could be a bright light in the retail sector with remodeling projects on the rise and consumers more confident about investing in their homes,” said Ray Walsh, CEO of Market Force Information.
HomeAdvisor found that the average household expenditure on home renovations increased by about 57 percent in the past year, which is helping home improvement stores thrive.
Home Depot posted sales of nearly $24 billion for the first quarter of 2017, which is a 4.9 percent increase compared to the same time period in 2016. Based on its year-to-date performance, the company reaffirmed its fiscal 2017 sales growth guidance and expects sales and comparable sales will both be up by approximately 4.6 percent.
Stephen Holmes, a spokesman for Home Depot, said the chain focuses less on low inventory in the housing market and more on home values. When homeowners feel their home is worth more in the current economic climate, they’re more likely to invest in larger projects like a kitchen remodel or making an addition onto the house, he said.
“When people feel they have good value in their home, they’re more likely to see home improvements as an investment rather than an expense,” Holmes observed.
Home Depot started working on its online strategy back in 2007 — making a strategic effort to move toward an “interconnected retail” presence. The chain found that about 40 percent of online orders are picked up in stores. Of that, more than 20 percent of those customers make an additional purchase while they’re in the store.
“Online supports the stores, stores support online,” he said. “One of the biggest things we did was … every online sale is credited to the most nearby store. The stores don’t feel they’re competing with online.”
Beyond homeowners making frequent stops to their local home-improvement stores, the major chains are also looking to cater to contractors and building companies as they struggle to fill mounting orders. With low inventory of residential real estate for sale, buyers are either remodeling their current homes or turning to professionals to build their dream homes.
One sure sign of the company’s success is the news that Home Depot announced earlier this month that it agreed to purchase Compact Power Equipment for $265 million. Compact Power Equipment provides equipment rentals at more than 1,000 stores and also provides maintenance services at stores like Home Depot.
Lowe’s has also followed suit, having recently purchased Maintenance Supply Headquarters in late June for $512 million. According to a statement put out by Lowe’s, the purpose of buying the wholesale maintenance supplier, which caters primarily to the multi-family industry, is to “deepen and broaden its relationship with pro customers and better serve their needs,” the company said.
Lowe’s sales for the first quarter increased nearly 11 percent to $16.9 billion from $15.2 billion in the first quarter of 2016, and comparable sales increased 1.9 percent.
“A solid macroeconomic backdrop, combined with our project expertise, drove above-average performance in indoor projects. We also continued to advance our sales to Pro customers, delivering another quarter of comparable sales growth well above the company average,” said Robert Niblock, Lowe’s chairman, president, and CEO.