As we enter the important selling season for the live fire industry, Lowe’s reported their Q1 earnings. They had some similar comments to The Home Depot on the consumer but also some nuances to their business model.

Much like other retailers, Lowe’s nominal revenue growth was from an increase in transaction size and a decrease transaction count. Some of that is attributable to the mix in the early spring, but it’s also an ongoing trend.

Comparable average ticket increased 1.5% driven by modest price inflation and strength in Pro and appliances, while comparable transactions declined 0.9% as growth in seasonal categories was offset by continued DIY discretionary pressures.

Brandon Sink, CFO at Lowe’s

Lowe’s was asked about their transaction being below 2019 level. In their response, they pointed to an increase in transactions in the back half of the year.

I’ll just add, we’ve been extremely focused on driving transactions, driving traffic in store onto our site. And I think that shows with our performance with transactions, some of the best performance we’ve seen here in several years. So focus is there. We’ve called out the sales driving actions that we’re going to continue to invest in. I think we look at the first half, it still is largely going to be skewed towards ticket. But as we look at the second half and expectations, we do expect transactions to continue to improve. It is going to be centered in those repair and maintenance categories, but anything we can get with the macro or any consumer engagement on these big-ticket discretionary categories is going to be upside to that.

Brandon Sink, CFO at Lowe’s

They also pointed to the difficult housing market, even calling it the most difficult market since the financial collapse. This is despite record levels of home equity.

I think overall, this has been the most difficult housing market that I have faced in this business since the financial crisis. And as Brandon mentioned, it’s almost exclusively or disproportionately on the DIY customer. That’s the majority of where our revenue comes from. And so I look at it from this perspective. We’ve delivered 4 quarters of positive comps in an environment where the DIY has faced more economic pressure than I’ve ever seen before. And so we’re really confident that as we start to see some type of moderation or normalcy in the home improvement and the housing market, we think that we’re positioned really well for long-term gains just because we’ve structured this business to win in any economic environment.

And again, with roughly 60% to 65% of our revenue coming from the DIY, facing this type of headwind, still able to deliver positive comps is something that we take as a win, but also we’re focusing on areas like home services, Pro, online, et cetera, that’s allowing us to continue to perform well.

Marvin Ellison, President and CEO at Lowe’s

With digital sales, it’s a different story. That continues to be a success story at Lowe’s and other large retailers. It seems like all of the major retailers are posting double-digit gains every quarter.

Now shifting to online. We delivered sales growth of 15.5% this quarter driven by continued enhancements to our user experience, standout online deals and improved fulfillment capabilities, including same-day delivery. And to enhance the value of our loyalty programs, we began offering free same-day delivery for purchases over $25 for MyLowe’s Rewards and MyLowe’s Pro Rewards members. This offering further differentiates our loyalty experience, helping to drive increased member engagement for both DIY and Pro customers.

Marvin Ellison, President and CEO at Lowe’s

There are also positive signs heading into summer. Lowe’s noted that their SpringFest selling event was a success, and their comps improved after the first month of the quarter.

Comparable sales were up 0.6%, driven by well-coordinated spring execution, including our SpringFest event, along with continued strength in Pro, appliances, online and home services. Comps for February were down 1.4% as winter storms impacted much of the country. Comps accelerated to 2.1% in March and 0.5% in April as spring arrived across the country and customers responded to our seasonal offerings.

Brandon Sink, CFO at Lowe’s

Consumer Metrics

Like other retailers, Lowe’s noted the K-shaped economy on their call where higher income customers still have money for discretionary spending.

What we’ve seen so far is what we’ve seen all year long, and that is we’re operating in what we would describe as a K-shape economy, where the higher income consumer spends and they’re spending on innovation and they’re spending on things to modernize their home and the lower income consumer is a little bit more cautious and a little bit more uncertain based on all of the macro factors that we all know so well. And we haven’t seen anything different in the start of this quarter that we saw in the first quarter. As a matter of fact, as I said earlier, what we’re seeing play out with the consumer is pretty consistent with what we forecasted when we gave our guidance earlier in the year.

Marvin Ellison, President and CEO at Lowe’s

Still focusing on that higher income cohort, another dynamic is there may be some additional dry powder there from anticipated tax refunds. Lowe’s believes that only a small portion have been spent.

we’ve done a lot of work on the tax stimulus trying to understand the nature and timing. Obviously, the macro events place a little bit more of a question mark around that. But we looked at Q1, the tax refund impact was more limited on our business, more significant drivers were the weather that I mentioned earlier. At this point, we estimate about 20% of the refunds have been spent. About 50% of that sitting in savings with consumers just given the uncertainty and the remainder of that has offset some of the higher fuel prices of recent.

And then we’re also estimating as we look forward, and this is based on IRS data, there still is just under about $50 billion of refunds that are yet to be distributed over the next 3 to 4 months, likely tied to extension. So in terms of spending, we do believe we could still see some benefits in Q2, in particular from higher income consumers, and we’ve contemplated that in our outlook here for Q2 and the balance of the year.

Brandon Sink, CFO at Lowe’s

Those could be key themes through grilling season. You have higher income consumers that are still spending, they’re spending on innovation, and they may have additional cash from refunds in the coming months.