Home Depot and Lowe’s Battle Over the Housing Market’s Maintenance Economy

Two major home-improvement retailers, Home Depot and Lowe's, are waging a battle for dominance in the housing market's maintenance economy amid a prolonged period of high mortgage rates. These rates are causing homeowners to be less inclined to finance expensive renovations, despite the fact that houses continue to age and contractors still have work to complete.

Home Depot reported second-quarter sales of $47.86 billion, a 5.7% increase from the previous year, while adjusted earnings per share were $4.92. Comparable sales rose by 1.7%, and the company maintained its full-year outlook. Lowe's, on the other hand, reported sales of $25.96 billion, an increase of more than 8%, but this figure fell short of expectations.

The company's comparable sales increased by just 0.2%, and adjusted earnings per share of $4.40 beat expectations. However, Lowe's moved its full-year outlook to the bottom of its previous range.

The divergence between the two retailers' financial performance highlights the changing landscape of the home-improvement market, driven more by the customers each company has targeted than by the similarity of their products. With homeowners reluctant to move and finance costly renovations, the housing market's ability to generate demand for home-improvement spending has weakened.

Mortgage rates have created a "frozen" housing market, suppressing transactions and, with them, large renovation projects that often accompany home moves. Home Depot CFO Richard McPhail described this as a housing market in a state of dormancy.

Despite this, Home Depot is still witnessing broad demand for smaller projects, indicating that spending is shifting towards maintenance needs that can't be postponed. Examples include repairing a failing water heater or addressing a plumbing issue. Contractors are now serving a wider range of spending occasions, including repairs, maintenance, commercial work, and projects that were already contracted. This shift in demand profile marks a change from the traditional discretionary DIY customer.

Home Depot has been actively building a business focused on capturing more spending from professional contractors. Their $18 billion acquisition of SRS Distribution in 2024, along with investments in fulfillment, delivery, and complex-project capabilities, has resulted in professional customers outperforming DIY customers during the second quarter.

Professional customers' transactions above $1,000 also increased by 2.4%. To cater to this growing segment, Home Depot has expanded its fulfillment capabilities aimed at professionals, including nationwide express delivery services.

Lowe's is also pursuing a similar strategy, focusing on the professional customer to reduce its reliance on the discretionary discretionary consumer. The company generated positive comparable sales for the fifth consecutive quarter and continued to show strength in its Pro, online, and home services segments. Online sales for Lowe's increased by nearly 16%, but gains were tempered by persistent weakness among the DIY consumer base.

To counteract this, Lowe's is expanding its Total Home strategy and targeting small- and mid-sized professional contractors. This approach aims to reduce the company's sensitivity to consumers who can indefinitely postpone discretionary spending.

In conclusion, Home Depot and Lowe's are adapting to a market where homeowners may be financially stable but cautious about major projects. This trend favors businesses capable of monetizing the unavoidable work of maintaining America's housing stock rather than relying predominantly on discretionary remodeling cycles.