Lowe’s and Home Depot both reported their Q4 earnings this week, and they both had similar takeaways. Both businesses are traditionally dependent on home sales, but there is one market dynamic that could change that.

Lowe’s Grill Sales Up

In addition to the dynamic with interest rates and home sales, Lowe’s explicitly mentioned their grill sales for the quarter. There’s a couple good grill selling days in there from holiday discounting, but we didn’t anticipate hearing much about grills in Q4.

This year, we’re in an even stronger position to meet customers’ backyard needs, and we’re seeing some early momentum in patio and grills in areas where the weather has already started to turn.

Our patio assortments are localized for the market and we have a great lineup of grills across Weber, Charbro, Blackstone and Pit Boss, including new Lowe’s exclusive products like the Webber Stealth family of grills. Overall, we’re pleased that, where the weather has cooperated, spring is already off to a good start.

Bill Boltz, EVP of Merchandising at Lowe’s

Hopefully that’s a sign of things to come for the outdoor cooking season. We should start to get into the replacement cycle for grills bought during the Pandemic but forecasting that is hazy with all the various macro pressures.

Home Depot Online Sales Keep Climbing

Home Depot has one of the most trafficked websites on the internet. It’s an area that they’ve continued to invest in both from a technology standpoint, but also from improving delivery speed and options. That investment continues to pay dividends for them, as their online sales keep climbing.

Turning to total company online sales, excluding the impact of the extra week in the quarter, sales leveraging our digital platforms increased approximately 9 percent compared to the fourth quarter of last year. There are a lot of drivers to our online success. From the focus on continuously improving the shopping and browsing experience to enhancing the delivery and post delivery experience to leveraging AI to enhance our chat features, product descriptions and creating rating summaries for our customers.

Billy Bastek, EVP of Merchandising at The Home Depot

Home Equity Lines of Credit (HELOC)

Both major retailers largely benefit when home sales are healthy. People buy new homes and then put money into fixing them up. There is a dynamic that exists though where they can benefit in the current environment with the lowest home sales in decades.

That’s through HELOCs, which is borrowing against the equity in a house. Home valuations are at a record high, interest rates haven’t materially come down keeping people in their homes at lower interest rates.

Yeah, at this point, while we’ve seen a little life in turnover in Q4, we’re not expecting meaningful increase of that 40-year low. We’ve likely reached the bottom of housing turnover at about 3% of units. But we’re not expecting a big rebound, nor significant increases in new housing starts.

However, if you just step back, I mean, if you look at our customer, they remain very healthy. We look at our customer today, we think about $110,000 average income. Those incomes have been growing. We’ve talked about the increase in home equity values, up 50% since the end of 2019 and then wealth effect through the stock market and other investments. So, our customer is very healthy. And as you say, if they’re staying in their homes longer, they will take on larger remodeling projects as opposed to moving, those that are locked into lower interest rates or just not wanting to get mortgages with the higher rates.

But we’re not anticipating a large decrease in mortgage rates. It will be more issue of consumers getting used to these higher rates. And to take on a larger project, it’s usually financed. And that financing is through HELOCs. And we’ve started to see a little increase in each of cash-out refis, as well as draws on HELOCs. But there’s literally trillions of dollars of equity built up in the US housing. And as homes continue to age and people are staying in those homes and realize that we’re highly unlikely to see the low interest rates we saw over the past two, three years, that they’ll eventually tap that equity and do the larger remodeling projects. We’re just not sure that turn comes in 2025 at a dramatically accelerated pace.

Ted Decker, President and CEO of The Home Depot

While that helps hardware retailers overall, it could trickle down into outdoor cooking. It’s less likely to materially impact retail grill sales, but it could present an opportunity for consumers to use a HELOC for an outdoor kitchen build.

We continue to see more brands step into the outdoor kitchen space. It will be interesting to see if a tailwind is developing from more manufacturer investment in the segment and from consumers’ willingness to access available capital.