As the peak selling season set in for the home improvement channel, Home Depot capitalized on shoppers’ spring project plans, with total sales increasing by 5.7% compared to the same period in 2018. Despite beating expectations for total sales, the retailers’ comps took a relative miss, posting 2.5% overall and 3.0% in the US, largely attributed to declining lumber prices and cold, rainy weather at the start of the quarter. While Home Depot reaffirmed its fiscal 2019 guidance, uncertainty about macro factors continues to loom over results.
Warm weather season experiences delayed start
While the spring season generally brings the strongest sales for the home improvement channel as shoppers take on new project plans, Home Depot’s results were dampened in Q1 by the continued impact of weather. To start, an unseasonably cold and rainy February took its toll on the retailers’ category performance. While the late arrival of spring weather tends to impact select categories, such as the lawn and garden pressures the retailer faced in the same period last year, severe weather took its toll across Home Depot’s business, pushing 17 of its 19 regions negative, along with transactions declining by 2.5% in the month. To further layer on pressure, the retailer faced tough comparisons due to hurricane-related sales from 2018 that did not repeat in 2018. Despite these pressures, the retailer was able to capitalize on shoppers’ projects as warm-weather broke and remains optimistic about continued peak season sales combined with fewer storm sales to comp in Q2.
Supplier implication: Continue to position products within project-focused and cross-category solutions as the retailer continues to invest in seasonal merchandising in Q2. Look for ways to connect your product experience between physical and digital channels to drive sales for the retailer.
Pro contractor initiatives come to fruition
In Q1, the pro shopper segment continued to drive growth for the retailer, again outpacing sales to DIY shoppers, and fueling a 3.9% increase in big-ticket transactions. To better serve these shoppers, Home Depot continued to onboard pros onto its dedicated B2B website, adding 35,000 new shoppers, for a total of 135,000 pros leveraging the new workflow management and pro-focused shopping experience. Additionally, the retailer emphasized the opportunity to engage pros beyond the shelf level and highlighted its commitment to growing the shopper base through its pro tool rental service. The expansion of the service, now available in 1,100 store locations, has improved pro engagement and increased overall spend as adoption has grown from 1 in 10 pros using the service in recent years, to 1 in 4 pros renting through Home Depot today.
Supplier implication: As Home Depot continues to prioritize pro shoppers, look for opportunities to partner your products with pro-focused services. Consider how pros may interact with your products differently than a DIY shopper and adjust messaging accordingly.
Commodity prices, macro environment continue to be sources of uncertainty
While the retailer leaned heavily on declines in lumber prices to explain its drop in comp sales, even sharing that removing the category would have yielded a 4.5% comp, the pressures highlight the sensitivities impacting the business. Although the retailer remains optimistic that lumber prices will normalize, even reaffirming its FY 2019 guidance, that rebound is reliant on spurred demand in the housing and construction sectors. As a potential slowdown looms within a post-recovery macro environment, the retailer will need to engage shoppers across its whole business while remaining operationally disciplined to attain its 2019 goals.
Supplier implication: Expect continued pressure for cost savings as the impact of deflation, tariffs, and the broader macro environment remains uncertain. Consider looking for ways to balance shopper-facing price increases and cost absorption across your whole product portfolio to lessen the impact of changing macro factors.
Next, we will turn our attention to Lowe’s, a retailer looking for a strong start to the spring season as it implements new strategic initiatives. For additional implications and predictions on what’s next, check back to KRiQ.com for Kantar’s in-depth analysis of the home improvement channel’s first quarter results and join us in Charlotte, NC on June 18 at our Home Improvement Workshop to gain a more detailed understanding of key retailer, shopper, and macro trends and what they mean for your business.