By Denny Jacob

Home Depot and Lowe's grew same-store sales for the first time in years, indicating the worst of the home-improvement decline may be behind them, analysts say.

The DIY rivals must still contend with a stagnant housing market, plunging consumer confidence and high interest rates that are weighing on lucrative remodeling projects in the year ahead. The companies offered cautious full-year outlooks that were below Wall Street's estimates, but say signs of a turnaround are ahead.

"Like Home Depot, this was Lowe's first positive comp in several years, perhaps another indication that the home-improvement market has bottomed," D.A. Davidson's Michael Baker said of Home Depot's 1.3% increase in U.S. same-store sales and Lowe's 0.2% increase year over year.

Lowe's and Home Depot cited healthy demand, but noted customers are holding off on big-ticket projects such as kitchen- and bathroom-remodeling projects that would boost the companies' top lines.

"We think the positive comp inflection is the key to the story and that the natural aging/maintenance demand cycle is reasserting itself," said Scot Ciccarelli, managing director at Truist, in a research note.

Signs of movement in the housing market could also mean better days are ahead for Home Depot and Lowe's, which were major beneficiaries of the homebuying frenzy of the pandemic years. A growing supply of homes on the market is shifting demand after elevated mortgage rates and record home prices kept sales subdued for two straight years.

The average home is changing hands for 2% less than the listing price as sellers seem more eager to close deals.

More homebuying means more sales involving paint and minor home-improvement items, but Lowe's and Home Depot need more larger projects--such as installing new tiles or outdoor decks--to boost revenue further.

As the housing market teeters, Home Depot's and Lowe's fiscal years will hinge on how much consumers are willing to spend on home improvement despite stubbornly elevated interest rates, UBS analysts say.

"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, they'll eventually tap that equity to do the larger remodeling projects," Home Depot Chief Executive Ted Decker said. "We're just not sure that turn comes in 2025 at a dramatically accelerated pace."

Write to Denny Jacob at denny.jacob@wsj.com

(END) Dow Jones Newswires

February 26, 2025 13:34 ET (18:34 GMT)

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