One thing about capturing the home front during a pandemic is that it allows consumers to see for a while where they are spending time and then decide to open their wallet to make themselves more comfortable.
The category for home delivery supply warehouses, which includes Lowe’s LOW,
and Home Depots HD,
of the world as smaller hardware and lawn and garden stores, reflects this trend. It has absolutely increased in recent months.
Looking at data on consumer spending extracted from debit card transactions that represent the average U.S. consumer, shows just how dramatic the spike has been.
Lockdowns and on-the-spot orders went into effect in many states in mid-March, and we see a roughly 10% year-over-year decline in consumer spending for that period. Nice enough: Most people did not do much of anything other than stay home.
Just two short weeks later, however, the climbs returned. And two weeks later, consumer spending shows a jump of 60% year-over-year, rocketing to 80% in early May, before rising to 40% -50% year-on-year growth for the next few months.
Sure, when spring and summer rolled by, everyone who had the means decided to spend it on things related to their home. These could be small home improvement projects that people suddenly had time to tackle, or garage and garden improvements for kids with home remedies who needed a place to walk. It can even be a small construction project to deploy one type of home office to make it more workable remotely.
While Home Depot is ready to report revenue on August 18, and Lowe’s is ready to report revenue on August 19, looking at the two heavyweights in this growing sector is particularly interesting.
Looking back at data on consumer discussions, Home Depot was the growth estimate in the pandemic, with 5% -15% year-over-year growth for the first months of the year, compared to Lowe’s relatively flat 0-5% growth.
Then something very interesting happens: The pandemic hits, and the growth curves change places. Lowe’s takes the lead in late March, showing 10% year-over-year growth to Home Depot’s somewhat negative year-on-year growth.
For the next two months, Lowe will increase its Home Depot regularly by as much as 20 percentage points, reaching 70% year-on-year growth to 50% of Home Depot in early May.
It is unclear why this happened exactly. Maybe it’s because some Home Depot stores actively limited the number of customers that could enter the store at the same time to ensure fair social distance, while Lowe’s took a similarly relaxed approach, relying on signs and intercom announcements to remind customers not to coherence.
Whatever the reason, in this period from about March 22 to May 24, Wall Street rewarded Lowe’s for its growth. Lowe’s share grew about 82% in this time frame, while Home Depot’s share gained a roughly 47% profit.
At the end of May, however, we will see the lines of consumer areas merge. Lowe’s loses his momentum; Home Depot gets its foot in the door again, and maintains a slim lead over Lowe’s in the coming months. Perhaps Home Depot’s investments in its supply chain and logistics earlier this year began to bear fruit and gave them a competitive advantage that helped them gain the top spot.
Did this change put a damper on Lowe’s share price?
Actually no – and that’s kind of weird. Since that reversal on May 24, when Home Depot consumers took over Lowe’s, Lowe’s share has continued to increase Home Depot’s performance more than twice, gaining about 23% appreciation for Home Depot’s 11%.
Randy Koch is the CEO of Facteus, a company that collects billions of consumer card transactions from more than 1,000 U.S. financial institutions.
.
