TRG | The Bottom Line – 11/19

The U.S. consumer in Q3’20 was focused on home improvement in the height of the global pandemic, which theoretically would set the stage for tough YOY comps by Q3’21. Further exacerbating comps has been rampant inflation in the construction sector. This week, however, Home Depot (HD) and Lowe’s (LOW) posted record quarterly results, both stocks hitting new all-time highs. CEO Craig Menear noted in its Q3’21 (Aug-Oct) quarterly earnings call, “Demand continues to remain strong. Customers continue to tell us that they have projects on their list. Pros tell us that their backlogs are significant. So, we’re going to stay focused on filling that demand.” Both companies are seeing higher ticket transactions and fewer total transactions versus last year as consumers shift to larger, more complex home improvement projects (kitchen remodels, etc.). Both companies continue to heavily invest to improve in-stock levels in an effort to keep pace with demand. From a two-year stack review, HD stated that all product categories were up “healthy double-digits,” while LOW two-year U.S. comps were up 34%.