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The Home Depot Sees Continued Softness in Grills

The Home Depot reported Q1 earnings today, where they guided down sales for the year. They felt pressure from lumber deflation and unfavorable weather, primarily out west. These are the key grill related takeaways from the large retailer.

Bad Weather

While it wasn’t confined to grills for Home Depot, bad weather hurting sales is something we’ve heard previously on the manufacturer side from Vista Outdoor and Middleby. What was most interesting that Home Depot revealed is out west when there’s bad weather, it causes lost selling weeks as opposed to a backlog.

And generally, we have talked in the past about the bathtub effect, and we wouldn’t have updated guidance base on stronger relatively weaker sales in Q1 based on weather because we would look to get that back. So, when you think of a shorter spring season in the North where people are going to get that activity done in a limited number of weeks. If you don’t get it done in the first quarter, people tend to make it up in the second quarter. The dynamic in the West, this went into our guidance of the minus 2 to minus 5, is the West, it’s more level weather patterns. We have very large stores, very high Pro-concentration. And when you get bad weather, you are not really looking at a bathtub effect to make it up in a short season. You just sort of missed that selling week.

Ted Decker, President and CEO of The Home Depot

Grill Softness

In what is bad news for both manufacturers and retailers, Home Depot continued to see softness in grills in Q1.

After a couple of years of unprecedented demand in the home improvement market, we continue to see softness in big-ticket discretionary categories like patio, grills and appliances that likely reflects deferral of these single item purchases and pull forward.

Billy Bastek, EVP of Merchandising

While any sales softness isn’t good, it’s especially a problem for the grill industry because there’s too much inventory. Manufacturers have estimated that inventory levels, and sell-through, would normalize in the second half of the year. That estimate could be prolonged if retail sales are below expectation.

Home Depot is also dealing with consumer macroeconomic factors hurting sales. More broadly than grills, they’re seeing consumers do smaller projects.

And then a newer dynamic now that we’re really seeing, again, is just this past quarter is a more cautious consumer, given the broader macro concerns, including credit availability.

Ted Decker, President and CEO of The Home Depot

A trend that has continued with consumers that Home Depot mentioned before is price sensitivity. That’s important for grills as new grill releases are used by manufacturers to reset the price level. They can’t push price increases too far on existing products, but new products can be priced higher.

And then lastly, with the buildup of inflation that we’ve seen, there is certainly some price sensitivity, particularly with respect to those bigger ticket discretionary items.

Ted Decker, President and CEO of The Home Depot
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