Expect Fewer Deals At Home Depot, Lowe's

Home Depot and Lowe’s are starting to realize that the surging housing market — which had fueled their own sales for the last few years — is really and truly over and it may not be coming back for a good long while. What does this mean for their customers? An emphasis on lower prices every day — and fewer promotions.

From CNNMoney:

After flirting with aggressive promotions earlier in the housing downturn, both retailers have backed away. The moves indicate a recognition by the retailers that it will be several quarters before demand picks up – with or without big discounts, according to industry experts.

And while the approach might cost the retailers some customers in the near term, it’s the right one longer term, said Sanford Bernstein analyst Colin McGranahan.

Even though Lowe’s and Home Depot this week expressed hope that housing sales may bottom soon, few industry watchers expect homeowners in the next year or two to resume the kind of major kitchen and bath renovations that fueled home- improvement sales earlier this decade.

$50 and $99 Carpet installation deals are a good example of the type of promotion that the big two will no longer be offering:

The Atlanta company, which a year earlier provided whole-house carpet installation for $99, is now charging $199. It has also pulled back on some of its credit promotions – offering a standard no payment, no interest promotion on purchases of at least $299 on its proprietary credit card for a 6-month term instead of the 12-month offer it has occasionally made.

Home Depot’s “judicious” use of promotions and improved forecasting of sales, margins and inventory helped it expand gross margin despite weak demand and rapidly escalating costs, Lehman Brothers analyst Michael Lasser said.

Lowe’s, meanwhile, recently raised the price on its whole-house carpet installation deal by $50 to $249 after the promotion hurt gross margins in the first and second quarters. President and Chief Operating Officer Larry Stone told investors and analysts that the No. 2 home-improvement retailer is focusing on “easy-to-understand promotions with a fewer, bigger, better approach.”


Home Depot, Lowe’s Pull Back on Promotions To Guard Margins [CNNMoney]
(Photo: meghannmarco )

Comments

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  1. jaydez says:

    Wow… I’m glad I got most of my renovations on my condo done last month.. I ven got my carpet installed for $199!

  2. timmus says:

    The moves indicate a recognition by the retailers that it will be several quarters before demand picks up.

    I’d like to know exactly what makes them think it will be several quarters before demand picks up. I guess anyone can be an industry expert.

  3. floraposte says:

    I think the fact that sales are still stagnant, inventory’s increasing, and there are plenty of sub-prime ARMs that won’t hit reality for the next couple of years makes that a fairly reasonable guess, though.

  4. floraposte says:

    Sorry, I meant house sales and inventory, not home improvement.

  5. madanthony says:

    I wonder if their logic – tying it to housing sales/prices – is flawed. Housing sales might kill some of their sales – flippers, people fixing up a house they just bought or are about to put on the market. But some people might decide that since they can’t afford to move and will have to stay in their house for a while, that it might be worth putting some money into fixing it up.

  6. You can already start to see this happening. A lot of the deals placards at Home Depot mysteriously have disappeared. Of course, I’ve also noted that customers have disappeared — at the height of the housing boom, Home Depot seemed busy every day, but now there are times even on weekends you go in and the place is half-deserted. People are not spending money like they used to, so this move seems counter-intuitive. You’d think they’d offer more deals to get people back in the stores and spending money.

  7. lker says:

    @NefariousNewt: I think it is pretty clear from this article that the two stores did offer more deals, but it was largely ineffective.

    So instead of selling at a loss to customers who simply aren’t materializing, the two stores have decided to cut their losses and try to ride out this housing downturn.

  8. RandomHookup says:

    Now Home Depot can lay off all those returning Olympians with a clear conscience.

  9. mac-phisto says:

    @madanthony: i’ve been wondering the same thing. near me, home depot & lowe’s (hell, even the local lumber yard) are more packed than ever. makes me wonder whether their cash woes are sales related or

    & as timmus points out, anyone can be an analyst, so i’m going to take it one step further – since high gas prices are keeping many folks from traveling, they’re spending more on their own “backyard destinations”.

  10. ratnerstar says:

    @madanthony: Much of the home improvement mania we’ve seen recently has been financed by easy, cheap HELOCs. That sort of credit is being rapidly curtailed. Plus, with the economy stagnant, many people are losing their jobs or seeing their real wages shrink, leaving little money left over for new kitchens.

  11. mac-phisto says:

    @mac-phisto: whoops! forgot to finish that first thought: “are sales related or”…not.

    freakin’ mondays.

  12. millcitymodern says:

    In my neighborhood you would never know there’s a housing crisis. People are working on huge projects on their houses (and I live in a modest neighborhood). We put a garage up this summer, and there are additions and renovations happening all around us. there’s a dumpster on every block. I wonder if people are just deciding that if they are going to settle in for a while they may as well make their homes as nice as possible.

    We are planning to replace our windows this fall, and if Home Depot won’t offer us an attractive financing option for them we may look elsewhere. I was counting on the 12 months no-interest financing to give me a bit of time to pay them off…

  13. Sudonum says:

    @floraposte:
    I don’t know that I’d agree that “home sales are stagnant”, although inventory is still rising.
    “Despite the third monthly sales jump this year, the number of unsold single-family homes and condominiums rose to 4.67 million, the highest number since 1968, when the Realtors group started tracking the data.> [abcnews.go.com]

  14. Darascon says:

    It’s funny that this is what is going to happen. Aside from smaller more niche stores being better for the DIY’er, you’d think they would spread around the incentives. Change it from bigger deals on narrow items to broader deals on combo stuff.

    With the housing market taking a big ol dump, remodeling/upgrading is a way to try to recoup some lost value for cheap. I’m currently installing hard wood floors thanks to Lumber Liquidators. Was hella cheaper than anything Lowes/Depot offered. Plus doing it myself is saving 1,000’s. Any little bit to raise the value of the house when all signs are dragging it down the drain.

  15. ViperBorg says:

    @mac-phisto: We need a special “Monday” edit button. :P

  16. CharlieInSeattle says:

    These stores suck anyway. I usually go to the local hardware store because they usually have what I need. For example I need 4 inch chimney liner for a pellet stove. Both these big box stores sell pellet stoves, just not the crap to install them. So I don’t shop at them anymore, I support the local guy, because he actually has the stuff in stock I need to complete the job.

  17. dragonfire81 says:

    Ok so business is down and their logic is to REDUCE promotions to increase profit and sales??

    Something seems wrong here…

  18. orielbean says:

    House prices will be at their rock bottom by end of 2009.

  19. floraposte says:

    @Sudonum: Whoops, you’re right. As usual, areas vary, but there was indeed a slight uptick. Unfortunately, it’ll take more than that to clear out inventory.

  20. Sudonum says:

    @floraposte:
    You’re right about that, it’s going to take quite a few more months of increased sales to see a reduction of inventory. FYI sales are also up in SoCal as well. [www.latimes.com]

  21. tripnman says:

    Lowes must love us, we received a 12 months, no interest mailer for purchases over $199 in today’s mail. Anything that says Home Depot on the outside of the envelope goes straight in the shredder, so no idea if they love us or not.).

  22. u1itn0w2day says:

    At Home Depot it seems certain items have doubled over the last 18 months.Especially on some building supplies.I noticed too that they have a lot of increases in the summer.Lowes has always been a little more but I always felt Lowes had better variety.

    Places like Home Depot have killed the local competition in many areas becoming a defacto monopoly.In the past Home Depots quite frequently were the cheapest if not cheaper now there almost right in line with many of the surivivng competitors.

    The Home Depot and Lowes ” created ” alot of amatuer contractors and helped perpetuate the flipping craze.I think they did it with cost as much as anything else.

    The only time our local Home Depot is really busy anymore is at night or on weekends.Even mornings are slow there now. I find myself not making the drive to Home Depot because their price isn’t low enough to offset gas prices.

  23. Sudonum says:

    @u1itn0w2day:
    Believe it or not, a lot of building supplies wholesale prices have gone up recently. Roofing shingles are up because of all the tornado’s in the Midwest earlier this year. It also doesn’t help that some oil is used to make shingles. Lumber is also up, I am told, due to mills shutting down because of the housing situation, meaning less supply, and I’m told it takes a while for a lumber mill to ramp back up. And of course, fuel to truck the items from manufacturer to distributor to retailer.

  24. u1itn0w2day says:

    I notice the increases on stuff like driveway sealer or mortar.Just 2 years ago I think HDs sealer price was about 8$ for 5 gallons now it’s around 15$.One gallon of crack filler was 4$ in 06 now it’s like 8$.The oil prices are screwing things up in more ways than shipping.

  25. seamer says:

    They could try deals in other areas. After all, how many kitchen renovations can one house have?

  26. RifRaf says:

    Blah…I’m a DIY guy anyway, so long as the raw materials don’t go up drastically in price I’m quite alright…

  27. u1itn0w2day says:

    @seamer:-you got a point,I don’t notice that many sales at Home Depot or even Lowes.They both advertise their regular price but not to much in the way of sales.

    I think the way they handle kitchens and appliances was basically designed for the boom which had flippers and others coming in regulary for stuff.

  28. Marshfield says:

    $199 for whole house carpet install is still a good deal. A very good deal, if you don’t lose the savings on marked up pad.

  29. engfish says:

    … and when my water heater burst this weekend, Lowe’s’s installation charge was $479. The water heater was $329!

    Happy ending (but not for Lowe’s): I found a plumber to install it for $175.