TRG | The Bottom Line – 8/19

Home Depot (HD) and Lowe’s (LOW) reported solid results in Q2 (May-July) this past week, providing an up-to-date view on both DIY and pro construction activity. Both HD and LOW reported positive comps, reflecting fewer transactions but higher tickets (partially due to inflation), which is impressive in the face of more consumer spending shifts towards travel and entertainment. Notably, both companies maintained FY’22 guidance (Note: LOW expects sales to be at the lower end). We continue to view these reports positively for both positive comps and rising inventory levels for both HD and LOW. To have positive comps on top of the massive step-up of home spending in 2020 and 2021 in the face of more consumer spending towards travel and services is quite astounding. This shows homeowners are utilizing their homes more, have strong balance sheets, low mortgage rates, and higher home equity, which provides a solid backdrop for home spending (both maintenance, repair, remodel), which also supports sales for many TRG-covered companies. Pro growth supports larger projects, such as kitchen & bath, and flooring. Big ticket strength reflects this.