Q1 2021 Index – Home Improvement

The home improvement and home goods sectors have been among the strongest in retail throughout the pandemic. When COVID initially hit, home improvement leaders like Home Depot and Lowe’s benefitted from essential retail status allowing consumers to embark on DIY projects with their newfound time at home. 

Then, the continued presence of at-home orders gave people even more time to realize what was lacking around the house. Then high levels of migration further contributed with more individuals looking to fully furnish or upgrade new homes. 

The end result was a sector that saw continuous strength throughout the pandemic. But, as more normal patterns of shopping behavior began to return in Q1, could the strength sustain, or will the sector’s strength finally show signs of waning?

We dug into our Q1 Quarterly Indexes to find out.

Ready for the Return of Normalcy?

Visits in Q1 2021 for the sector were up 22% year over year when compared to the same period in 2020. This was actually the largest visit increase over the last four quarters, something that can be attributed to both Q1 not being a normal peak period for the sector, and the comparison to 2020’s dip in March. 

Yet, while year-over-year visits were still growing, there was a continued decline in overall quarter-over-quarter visits. This shows that the sector’s normal seasonality may have remained intact, even while year-over-year growth surged, leading to huge implications for the sector. If normal seasonality continues into the coming months, we could see another quarter of significant year-over-year growth for the space. However, if the last few months fulfilled much of the demand, then the sector’s return could include a year-over-year drop in visits. At this stage though, it feels like madness to bet against the sector, especially when diving deeper into specific brands. 

The Leaders Continue to Perform

Some of the strongest players throughout the pandemic have included Home Depot, Lowe’s and Floor & Decor, and each of these brands saw continued year-over-year growth in Q1. Floor & Decor led the way with a 64% jump, while Home Depot and Lowe’s notched increases of 21% and 22% respectively. 

Yet, for the latter two, there was a quarter-over-quarter decline in visits. Much of this centers around seasonality, but there are significant implications for Home Depot, specifically. In the early months of the pandemic, Lowe’s saw significant visit increases while Home Depot saw much more limited growth. This led to a shift in overall visit share between the two brands, where Lowe’s actually surpassed the typically wider-reaching Home Depot

But, much of the reason for this shift was based on differences in operating procedures between and in regional store distributions. The result is a situation where Home Depot could see an even more demonstrable surge in Q2 than Lowe’s, something that could drive significant impact, especially considering the brand’s continued overall visit lead. 

Rising Players Present Even More Hope

But even if the pandemic’s top-tier performers don’t continue their impressive runs, there’s still reason to believe the sector will outperform as a whole. Brands like Tractor Supply, At Home and HomeGoods, have also surged in the last few quarters, and their relative upside could be enormous. 

For example, HomeGoods saw year-over-year visit growth of 47%, and just a 9% decline on the holiday-driven Q4, indicating that the brand’s strength may actually be increasing. The combination of a home furnishings focus alongside a value orientation is perfectly suited to the current environment. 

Will the coming seasonal peak drive even more success for the home improvement and home goods sector? Can brands like HomeGoods thrive deeper into 2021?

Visit our Quarterly Indexes at Placer.ai to find out.

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