TRG | The Bottom Line – 11/25

As we wrap up Thanksgiving and a choppy market this fall, recent Home Depot (HD) and Lowe’s (LOW) Q3 earnings (Aug-Oct) show some resiliency of home spending in 2022 is expected to continue. Both HD and LOW reported solid results in Q3 (Aug-Oct), with positive comps continuing to be supported by higher ticket outpacing fewer transactions, which is impressive in the face of more consumer spending shifts towards travel and entertainment, and a weaker consumer backdrop. Management teams called out a healthy consumer holding up demand. As it turns out, consumers are willing to pay upwards of $300-$400 for a creepy 12-foot skeleton for Halloween, a point that was brought up during HD’ investor call. DIY was positive, but Pros continue to show stronger growth for both companies and have extended backlogs. The resiliency of sales for both companies and customer types (Pros and DIY) is astounding. We believe many investors are cautious on housing overall, given higher rates, weakening consumers, and pull-forward of home spending over the past few years. The countervailing forces of aging homes (including the boom of homes built prior to the Great Financial Crisis are hitting ~20 years old), low mortgage rates, and staying in place are proving robust.