Home improvement stores are on track to permanently land in the essential services or daily needs category, which retail investors have focused on for years. This year, home improvement activity has increased dramatically, and 40% of consumers have indicated that they plan to continue home improvement projects beyond the recession, according to research from the NPD Group. The activity has driven home improvement store sales up 11% this year.
During the pandemic, home improvement stores have become the second fastest growing retail segment in both brick-and-mortar and online sales. In lawn and garden, tools, paint, kitchen and bath and hardware segments, each saw a double-digit increase in both online and in-store purchases. The average shopping trip also increased 10% compared to the average trip in 2019.
Home Depot Versus Lowe’s
Placer.ai, which also looked closely at shopping trends in the major home improvement brands, found that Lowe’s saw an early surge in sales in April, up 14.1% for the month. Home Depot on the other hand, didn’t see an increase in sales until May, when activity jumped 26%. In the same month, Lowe’s continued to outperform its competitor, seeing a 46.6% increase in sales. Lowe’s has continued to outperform Home Depot through the pandemic, although both have seen significant increased in activity and the gap narrowed. Notably, significant sales growth continued in June and July, well after home improvements’ normal peak season.
A Long Term Trend
Weekly visits have continued to show strong sales, all the way through early August, the most recent data available. According to Placer.ai, this indicates that the home improvement trend could be long term, as the NPD Group data also suggests. The activity has been driven in part by the fact that people are staying at home more, as well as by homeowners that may have had to delay new home purchases due to economic concerns. In place of upgrading or purchasing a new home, these homeowners are renovating. This latter trend is what may continue to drive home improvement activity beyond the pandemic.
For landlords, the strong sales activity has also translated to strong rent collections through the pandemic. In fact, home improvement collections have been on par with grocery rent collections at 97%, according to research from BTIG. Home improvement retailers have also continued leasing activity and expansion through the pandemic, another signal to landlords that the retail segment is a good bet for the future.