Americans are spending more money on home repairs than ever before, helping home improvement retailers ward off the negative impacts of online competition seen with other retail stores.
While other retailers are closing thousands of stores this year, home improvement stores like Home Depot, Lowe’s and Handyman Ace Hardware have seen boosts in revenue within the past year — and a major reason is the shortage of new single-family houses in the market, some experts say.
Some homeowners are opting to add additions to their existing houses or invest in major home improvement projects. U.S. consumers will spent a record $316 billion on remodeling their homes this year, according to the Harvard University Joint Center for Housing Studies. That’s an increase from last year’s $296 billion spent on home improvement, and the $222 billion spent in 2009 amid the Great Recession.
“Home improvement could be a bright light in the retail sector with remodeling projects on the rise and consumers more confident about investing in their homes,” said Ray Walsh, CEO of Market Force Information.
HomeAdvisor found that the average household expenditure on home renovations increased by about 57 percent in the past year, and that’s helping home improvement stores thrive. The two home improvement business giants — Lowe’s Companies and Home Depot — have both reported increased sales for the first quarter of 2017.
Home Depot posted sales of nearly $24 billion for the first quarter of 2017, a 4.9 percent increase compared to the same time in 2016. Based on its year-to-date performance, the company reaffirmed its fiscal 2017 sales growth guidance and expects sales will be up approximately 4.6 percent and comp sales will be up approximately 4.6 percent.
Stephen Holmes, spokesman for Home Depot, said the chain focuses less on low inventory in the housing market and more on home values. When homeowners feel their home is worth more in the current economic climate, they’re more likely to invest in larger projects like a kitchen remodel or adding an addition onto the house, he said.
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“When people feel they have good value in they’re home, they’re more likely to see home improvements as an investment rather than an expense,” he said.
The chain, which has stores in the Dayton region, Butler County and Springfield, started thinking about their online strategy back in 2007 — making a strategic effort to move toward an “interconnected retail” presence. The chain found that about 40 percent of online orders are picked up in stores. Of that, more than 20 percent of those customers make an additional purchase while they’re in the store.
“Online supports the stores, stores support online,” he said. “One of the biggest things we did was every online sale is credited to the most nearby store. The stores don’t feel they’re competing with online.”
Home Depot also has a distribution center in Monroe, and employees approximately 1,000 associates in the Dayton area.
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Locally owned stores have benefited from the booming housing market too. Handyman Ace Hardware, which has locations across the Miami Valley including stores in Springfield, Kettering and Beavercreek, has seen sales increase within the past year. Owner David Grimes attributed the positive sales to myriad of reasons including the season, weather and the economy, he said.
Beyond homeowners making frequent stops to their local home improvement stores, the major chains are also looking to cater toward contractors and building companies that are busier than ever. With low inventory of residential real estate for sale in Southwest Ohio, buyers are either remodeling their current homes or turning to professionals to build their dream homes.
Montgomery County saw an increase from 280 permits in 2015 to 335 single-family housing building permits in 2016. For 2017, there have already been 181 permits granted to date. Warren County has for years been where the most new homes have been built. The growing county south of Dayton has seen 582 homes already built this year, compared to 653 in 2015 and 806 last year.
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As other retailers shed assets, Home Depot also announced earlier this month that it agreed to purchase Compact Power Equipment for $265 million. Compact Power Equipment provides equipment rentals at more than 1,000 stores, and also provides maintenance services at stores like Home Depot.
“The acquisition allows us to further improve the customer experience – in particular for pros – through enhanced equipment and tool rental offerings. It also allows us to grow Compact Power’s best-in-class building services capabilities,” Menear said.
Lowe’s also acquired a company, Maintenance Supply Headquarters, in late June for $512 million to “deepen and broaden its relationship with pro customers and better serve their needs,” the company said.
Lowe’s has locations in Trotwood, West Carrollton, Huber Heights, Beavercreek, Centerville, Xenia, Middletown, Troy, Springfield and West Chester. Sales for the first quarter increased nearly 11 percent to $16.9 billion from $15.2 billion in the first quarter of 2016, and comparable sales increased 1.9 percent.
“A solid macroeconomic backdrop, combined with our project expertise, drove above average performance in indoor projects. We also continued to advance our sales to Pro customers, delivering another quarter of comparable sales growth well above the company average,” said Robert Niblock, Lowe’s chairman, president and CEO.
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