Why home improvement retailers are going after pro contractors
The home improvement company Lowe’s reported Tuesday that first-quarter sales were down from the same period last year. The company’s CEO, Marvin Ellison, said on the earnings call that uncertainty around interest rates, inflation and spending on experiences are all keeping people from putting their dollars toward do-it-yourself projects.
One bright spot for the company? Spending by professional contractors was up. This is an area that Lowe’s has been investing in, looking to compete with its rivals, including Home Depot.
Jim Moore has been working as a contractor for about 20 years. He buys lumber, tiles, pipe fittings mostly from one place.
“It’s always been Home Depot for us,” Moore said. “We just stay with what we know.”
“It’s kind of become synonymous with contracting,” added his colleague David Muriel-Diaz while they were on a smoke break from installing a door in a Baltimore apartment.
The overall professional contractor market in North America is worth about $500 billion, said Drew Reading, homebuilding analyst at Bloomberg Intelligence.
“Professional contractors tend to be loyal to where they’re shopping. So to make inroads to that customer for Lowe’s is going to continue to take time,” he said.
Reading said that about 25% to 30% of Lowe’s sales are to pro contractors. At Home Depot, it’s about half.
Lowe’s has stated it’s going after small- and medium-sized contractors who might remodel a kitchen or a bathroom. Home Depot has been positioning itself to become a one-stop-shop for really big jobs, “somebody doing, say, a full house renovation or an addition,” Reading said.
High interest rates are keeping a lot of homeowners from taking out loans to remodel. But if rates go down later this year, professional contractors should see more big-ticket projects.
“They’re not being canceled. They’re just simply being deferred until the timing gets a little bit better for consumers,” Reading said.
Also, much of the housing stock in the United States is older, and those homes are going to need TLC beyond what a regular DIYer can do, he said.
Reading also pointed out that while Home Depot and Lowe’s compete with each other for these professionals, they’re also up against specialty stores for flooring, lumber and electrical equipment.
Baltimore contractor Jim Moore said it’s helpful if the help knows what they’re talking about — “If you had a trained guy in the plumbing aisle that could say, ‘Oh no, you can’t use that for gas lines, you have to use this, this or this,'” he said.
He said one thing he likes is being in and out of stores as fast as possible. Time spent shopping is time not spent building or earning money.