Second quarter results from Home Depot and Lowe’s offer perhaps the clearest evidence yet of how a prolonged period of elevated mortgage rates is changing where money flows inside the roughly $1 trillion U.S. home-improvement economy.
Homeowners who are reluctant to move are also reluctant to finance expensive renovations. At the same time, houses continue to age, and contractors still have jobs to finish.
Home Depot on Tuesday (Aug. 18) reported second-quarter sales of $47.86 billion, up 5.7% from a year earlier, with adjusted earnings of $4.92 per share. Comparable sales rose 1.7%, and the company maintained its full-year outlook. On Wednesday (Aug. 19), Lowe’s reported $25.96 billion in sales, up more than 8% but below expectations, while comparable sales increased just 0.2%. Adjusted earnings of $4.40 beat expectations, helped partly by tariff refunds, but Lowe’s moved its full-year outlook to the bottom of its previous range.
The divergence says less about two retailers selling similar products than about the customers each has spent years positioning itself to serve.
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The Housing Freeze Is Reordering Industry Demand Toward B2B
The American housing market does not need to collapse to reshape the home-improvement business. It merely needs to stop moving. Housing turnover has historically been an unusually powerful catalyst for home-improvement spending. Buying or selling a house can trigger a cascade of projects: new flooring, remodeled kitchens, fresh paint, upgraded bathrooms and other discretionary improvements.
That engine is sputtering. High mortgage rates have created a lock-in effect for homeowners sitting on substantially cheaper loans, suppressing transactions and, with them, many of the large renovation projects that accompany a move.
Home Depot CFO Richard McPhail described the backdrop as “frozen” housing-market conditions. Yet the company is still seeing broad demand for smaller projects. Home Depot said smaller projects increased while larger projects declined during the quarter, underscoring how spending is migrating toward maintenance demands that are harder to defer. After all, a kitchen remodel can wait. A failed water heater can’t.
Contractors serve a wider range of spending occasions, including repairs, maintenance, commercial work and projects already under contract. That creates a different demand profile from the discretionary DIY customer deciding whether new cabinets or a patio renovation can wait another year.
Home Depot has spent years building a business designed to capture more spending from professional contractors, including its roughly $18 billion acquisition of SRS Distribution in 2024 and subsequent investments in fulfillment, delivery and complex-project capabilities.
According to the company’s earnings, professional customers outperformed DIY customers during the second quarter, while transactions above $1,000 increased 2.4%. Home Depot is also expanding fulfillment capabilities aimed at professionals, including nationwide express delivery. For professional customers, inventory availability, job-site delivery, credit, fulfillment reliability and the ability to source an entire project matter as much as the retail experience.
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Lowe’s Is Racing Toward the Same Pro Customer as Home Depot
Lowe’s results illustrate why that customer mix has become strategically important. The company generated its fifth consecutive quarter of positive comparable sales and continued to report strength in Pro, online and home services. Online sales rose nearly 16%. But those gains were offset by persistent weakness among discretionary DIY consumers, prompting Lowe’s to narrow its full-year forecast to approximately $92 billion in sales and $12.25 in adjusted EPS.
Lowe’s push to expand beyond its traditional retail base through its Total Home strategy and deeper penetration of small- and midsized professional contractor aims to reduce the company’s sensitivity to a consumer who can indefinitely postpone discretionary spending.
Lowe’s also said competitors became unusually promotional in seasonal categories during July, using tariff refunds to finance price reductions. Lowe’s declined to follow some of that discounting, contributing to a 1.2% comparable-sales decline for the month, a reminder that discretionary retail spending can quickly become a contest over price when underlying demand is weak.
Home Depot and Lowe’s are adapting to a market in which the homeowner may remain financially healthy while behaving cautiously around major projects. That favors businesses capable of monetizing the unavoidable work of maintaining America’s housing stock rather than relying predominantly on discretionary remodeling cycles.
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