As the pandemic rages on, throwing many retailers into financial distress, the home improvement sector appears to remain a bright spot.
The home's purpose, in many cases, transitioned into offices, schools and entertainment spaces, and as a result, many consumers began investing more into them. According to GlobalData research, around 70% of consumers took on at least one home or garden project during the third quarter, compared to about 51% who did so during the same period last year.
"Savings from lower outlays on commuting, eating out and not taking vacations have given consumers a pool of cash which they have diverted into home projects and activities," GlobalData Retail Managing Director Neil Saunders said in emailed comments.
The result has been booming sales and increased demand for home improvement retailers.
The Home Depot reported Tuesday that third quarter net sales increased 23.2% year over year to $33.5 billion, while comparable sales ticked up 24.1%. Comp sales in the U.S. increased 24.6%.
Executives on a call with analysts Tuesday said comp sales improved double digits in all of its top 40 markets, while comps in Canada were "above the company average" and Mexico "posted its best performance since the onset of the pandemic," with a double-digit comps increase.
The retailer also reported strong sales from both its pro and DIY customer bases, with the two groups each posting double-digit growth during the quarter. Net income improved 23.9% to $3.4 billion.
Investments into its supply chain, stores and partnerships with suppliers have allowed the retailer to improve in-stock levels, fulfillment and delivery times, and in-store replenishment, among other things. However, COO Ted Decker noted on the call that while in-stock levels have improved for 12 consecutive weeks in its U.S. stores, the measure has yet to return to pre-pandemic levels.
CEO Craig Menear also highlighted how the retailer's digital investments have paid off. During the third quarter, digital sales grew 80% from last year, while its Halloween events specifically received "record level sell through" as a result of increased digital offerings and enhanced presentation, the company said.
"During the third quarter, we hosted our most successful Halloween event with both in-store and online offerings," Decker said. "Customers responded to our larger assortment of animatronics, inflatables and yard décor, as evidenced by our 12-foot giant skeleton that sold out before October, helping drive a record level of sell-through for the event."
The retailer also announced Tuesday it would invest $1 billion to boost its employees' wages annually.
Meanwhile, Lowe's on Wednesday reported third quarter net sales rose 28.3% to $22.3 billion as comp sales increased 30.1%. U.S. comps increased 30.4% during the quarter.
The retailer's net earnings decreased 34% to $692 million from $1 billion last year. However, this was a result of a $1.1 billion loss on debt extinguishment, executives said on the call. Without this loss, net income would have risen 67%, according to Saunders.
Lowe's prior to the pandemic was already working on ramping up its online business to improve customer experience. In 2019, it said it was investing half a billion dollars annually until 2021 in order to transform the technological makeup of its business, which included opening a new tech center in Charlotte, North Carolina. The retailer in June also rolled out an augmented video chat tool geared toward its pro customer base to allow them to virtually visit homeowners and clients.
Those investments appear to be paying off as the retailer reported website sales increased some 106% during the quarter.
Larger players in the sector weren't the only ones to benefit during the quarter. Ace Hardware on Wednesday reported record third quarter revenues of $2 billion, an increase of 30.7% year over year, while its U.S. comps improved 28.9%. Net income reached $98.7 million (also a record), up 63.1% from the year-ago period. Ace also reported that online orders ticked up a whopping 221% from last year.
Heading into the winter months, where consumers may be even more confined to their houses, analysts don't expect the boom in home improvement investments to subside any time soon.
"Despite elevated activity for most of 2020, this trend shows no sign of weakening and, if anything, is intensifying as we come into the winter months as consumers will be forced to stay inside more," Saunders said.