When you look at the stock market and wonder how the market indexes have recovered so quickly after the economic shutdown due to the coronavirus, there’s a lot of opinions as to how this happened. Outside of the technology darlings of the work-from-anywhere movement, there was little more than community chatter about what was going on during the lockdown. Well apparently, people have been making changes to their homes. The Home Improvement vertical had an absolutely incredible quarter.
In the last couple of days, the major hardware/DIY chains have been reporting earnings and sales information for the investing community. The two big public chains whose primary business is in this category are Home Depot and Lowe’s. These two largest home improvement retailers, had great earnings reports and equally good sales reports [Home Depot better than Lowe’s]. On August 18th, Home Depot released earnings, which featured year-over-year earnings growth of 26.8%, better than the 24.4% expected. The noteworthy part of their report is the 23.4% jump in revenue compared to a year ago. Wall St. analysts expected an increase of 13.3%, which is an increase that only the quarter ended Jan ’19 came close to. Growth of 23.4% is a huge jump.
On August 19th, Lowe’s released their earnings report, which had an even better revenue jump. Year-over-year, earnings per share jumped 74.4%, well ahead of last quarters’ 45.1%, but again, the big story is the increase in revenue. Wall St. analysts expected a revenue increase of 18.5%, revenue came with an increase of 30.1% over last year.
Between these 2 companies, revenue came in at a combined $65.4 Billion after growing by $13.5 Billion. For those of us that follow how people use the internet, like us, this shouldn’t be that much of a surprise. The charts below illustrate the level of interest people have had in these two retailers.
First, the chart below illustrates the interest, based on relative search volumes of just the names of these two retailers. Almost as soon as the lockdown started in the middle of March, interest started to grow and peaked a couple of times in May. The interest has declined from these peaks (and has recently increased again), but the level of interest in both retailers remains significantly higher that prior periods (with the exception of the black friday sales period). The charts from Google Trends represent indexes, not absolute numbers. To give a little scale to this data, in an average month the term ‘home depot’ is searched 37.2 million times and ‘lowes’ is searched 20.4 million times. These represent massive search volume.
This second chart illustrates Google search interest on the 2 retailers over the last 5 years. This provides some historic reference. The peaks during the pandemic lockdown are significantly greater than any other time during the last 5 years, including the holiday sales periods. This is really unprecedented.
To see more on these search trends, refer to Google Trends
What does this mean for the future? How will the home improvement vertical change over the next 12 months? There’s a number of things that this could mean, and we are not sure which is the case. One option is that the recent spike will “cost” future growth because people just moved up projects that they were interested in doing at some point in the future. Another option is that a lot of this activity was due to increased prices of supplies and that these retailers were just doing what they need to do, which is pass those cost increased to the consumer. Yet another option is that the consumer decided to take on new projects to make things more comfortable at home.
The likely case is that there’s a degree of all 3 mingled into the numbers. Something to keep in mind is that the more ‘make home more comfortable’ comes into play, the more likely there will be some social and consumer behavior changes related to this. For example, a lot of people in the area that i live (Long Island, NY) created a lot of outdoor living spaces and bars and I even just finished building out an office (and recreation) space in my basement. This could indicate that some previous behaviors may change like eating out less often and hanging out at home.
Time will tell, that is one of the reasons that we’ve changed the focus of our site recently, so that we can help our clients (and us) understand how these trends will change our own businesses.