The home improvement sector was one of the biggest retail winners of 2020 and 2021. But in the first half of 2022, inflation caused consumers to think twice about home improvement projects that could break the bank. We looked at six leading brands in the home improvement sector – Lowe’s Home Improvement, The Home Depot, Tractor Supply Co., Ace Hardware, Menards, and Sherwin-Williams Paint Store – to see if we could spot renewed foot traffic trends that could indicate broader consumer confidence and discretionary spending health.
Year-Over-Year Visits Trending Up
2021 was an especially strong year for home improvement foot traffic. And combined with this year’s skyrocketing inflation and tighter budgets, 2021’s strength made for a challenging year-over-year (YoY) comparison for 2022. In addition, the effects of high gas prices and inflation also limit non-essential spending, an added obstacle for the segment.
Still, foot traffic data indicates that most home improvement brands have been consistently narrowing their YoY visit gaps over the past six months. YoY visits in August 2022 narrowed across the board for Lowe’s (-15.2%), Home Depot (-11.1%), Tractor Supply Co. (-5.0%), Ace Hardware (-5.7%), and Menards (-9.7%).
Sherwin-Williams broke positive in August 2022 as YoY visits to the chain grew by 5.9%. A portion of this growth can be attributed to a significant increase in the number of Sherwin-Williams locations. However, YoY visits-per-venue have also risen steadily, an indication that the chain hasn’t cannibalized visits during its expansion.
So, while most of the brands we compared are still in the red for monthly YoY visits, visit trends are improving – a sign that consumers did in fact return to at-home projects, or took on new ones, as the summer months progressed. It further indicates that the effects of inflation on non-essential spending could be dissipating - a critical and potentially trend for many retailers.
Comparisons to 2019
Analysis of the brands’ Yo3Y visits-per-venue gives a broader perspective on the home improvement sector and lets us compare visits to the category’s performance prior to its pandemic-induced surge. Location analytics shows foot traffic in recent months trending in the right direction, which could signal that discretionary spending is on the mend.
In August 2022, Lowe’s Yo3Y visits (-4.5%) cut its June visit gap (-9.8%) by more than half, while Menards also more than halved its June Yo3Y visits dip (-12.2%), climbing to -5.5% in August. Home Depot stayed at less than a quarter of its June visit gap (-7.0%) in August (-1.7%). And not to be understated, Sherwin-Williams quadrupled its Yo3Y visit growth between July (2.8%) and August 2022 (11.4%).
Leading the pack in Yo3Y foot traffic, Tractor Supply sustained an overwhelmingly positive visit growth of 36.1% in August, on par with its performance in recent months. And while the chain has been undergoing rapid expansion, Yo3Y visits-per-venue have grown as well, suggesting that new locations are successfully attracting visitors and growing Tractor Supply’s customer bases.
If the Yo3Y data is any indication, home improvement foot traffic and discretionary spending health look to have taken a positive turn.
Home Improvement’s Seasonality
Historically, the home improvement space is subject to a good degree of seasonality. Foot traffic data shows that visits usually pick up as the weather improves in the spring, with the largest jump taking place in May. A second peak occurs in November.
Due to rising inflation in 2022, the impact of the regular spring seasonal foot traffic boost has been relatively muted. Visits in May 2022 were up 46.7% relative to a January 2018 visit baseline. By comparison, visits between January 2018 and May 2020 were up 84.2% on average. And in May 2021, visits were up 71.3% relative to the same January 2018 baseline.
Taking into account the already climbing YoY and Yo3Y foot traffic in the home improvement space, there is potential for more positive visit trends down the line as widespread concern over inflation subsides.
Home improvement projects in the spring may be more discretionary in nature, with a focus on improving curb appeal and enjoying the outdoors. But projects leading up to winter are likely more essential, with the aim of preparing for the inclement weather ahead. The recently narrowing visit gaps give reason for optimism that the upcoming November peak will give the sector a significant boost.
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