Specialist
Former VP at The Home Depot Inc
Agenda
- Category trends in the North America home improvement market, focusing on DIY demand softening and pro services backlogs
- Analysis of viable merchandising and product mix strategies for 2023 spring-summer season
- Inventory dynamics and implications of supply chain recovery
- Medium-to-long-term outlook for pricing and volume dynamics
Questions
1.
What are 2-3 significant trends you’d highlight as most relevant to pay attention to for the home improvement market in North America?
2.
Could you elaborate on the demand softening we’re seeing for DIY, particularly the categories that have been under the most pressure?
3.
A relevant metric to track is average ticket prices. What is a typical mix for national home improvement retailers such as Lowe’s in terms of the types of categories that encompass most of their higher-ticket selling items and how these have performed? Important categories are outdoor, patio, outdoor grilling, etc.
4.
This dynamic between the impact of seasonality on home improvement retailers and offsetting that with what we’re seeing from the consumer is interesting. What have we seen in recessionary or deflationary periods with the consumer pulling back or trading down? How have categories trended?
5.
What’s your outlook for product mix? What adaptions would you make in 2023 to offset inflationary pressures and maintain average ticket pricing at a high enough level as possible? What mechanisms are available to merchandise managers at retailers?
6.
What’s the optimal merchandising strategy for a home improvement retailer? What specific categories might see greater emphasis? Could this be seasonal staples declining, such as outdoor, patios, grilling equipment, etc?
7.
What pricing trends did you see in 2022, category-by-category? How do you see price reductions carrying through to 2023? What categories do you believe will see the greatest relative reductions, and where do you foresee inflation-driven pricing being maintained for the next 12-plus months?
8.
What does the typical seasonal uptick look like for home improvement retailers following spring, and what will this look like in 2023? Will retailers see growth in the mid-single digits? How much more mitigated will be the seasonal uptick compared to prior years with fewer macroeconomic headwinds?
9.
Certain leaders at home improvement retailers attributed recent struggles to difficult weather conditions. How should we think about YoY comps in terms of revenue patterns we’re witnessing right now? Are home improvement retail leaders trying to adapt?
10.
How much of a laggard effect has inflation had on home improvement retailers? It seems it took a while for the impacts on the consumer to be reflected in DIY performance of many retailers. If there is a relaxation of fiscal policy and macro headwinds, when might we see that shift impacting retailers’ P&Ls? Would a relative recovery come in early 2024 or the back end of 2023?
11.
There has been commentary that Lowe’s might post positive comps, due to particularly difficult weather patterns in 2022. What’s your take on the company’s ability in 2023 to offset macro headwinds and consumer pressures, assuming it sees favourable weather patterns? Might it be in a position to grow?
12.
What do you make of recent reports of an uptick in confidence for homebuilders? What implications might this have on retailers’ pro services segments? Ongoing discussions have touched on slowdowns, building costs, real estate prices and other concerns around the housing market. How do you view this in terms of the order backlog retailers currently see?
13.
Observers estimate the backlog will be depleted around the midpoint of 2023. Would you agree? How have cancellation rates been trending vs new project bookings?
14.
What shift have you seen in project focuses? A single- to multi-family home focus shift has been one observable trend, as has changes in project scale. Can you talk us through the changing nature of projects?
15.
There seems to have been an observable trend of the DIY outperforming pro segment. Will that continue to be the case through the rest of 2023?
16.
How do you see re-uptake for new pro projects trending? This is coming off of a very historical time in bookings for pro-services projects during the post-pandemic period. Given current normalisation trends alongside macro headwinds, at what point do we begin to see recovery? If fiscal policies are already being relaxed in homebuilders and confidence is rising, how much of a lagging element is there?
17.
How do you see retailers leveraging online vs in-store shopping? What strategic value does online have in leveraging selling costs, order fulfilment and consumer reach, given the decline in DIY and the normalisation of pro business?
18.
Could you talk about the differentiation in demand or price elasticities between online and in-store?
19.
How do you see the revenue share between online and in-store trending for home improvement retailers in the near and long term, as consumers continue to adapt and accept online orders? How are retailers continuing to improve their fulfilment capabilities?
20.
What is your outlook for the growth of the digital channel? How much of total sales will it be responsible for, and what will become the industry standard for home improvement retailers?
21.
How does this impact retailers’ unit economics? What additional cost-saving or margin-expansion opportunities, should leadership be focusing on in the near and long term?
22.
What do you make of the opportunities of rental tool services and light equipment? How do retail players see this segment and how will it perform vs traditional segments through 2023? Are there tailwinds from a cost-stricken consumer utilising rental tool and equipment services if budgets are tight?
23.
What is the total market opportunity for rental services in terms of consumer awareness and adoption? How do retailers view the go-to-market strategy behind these services, and what is the untapped opportunity still available?
24.
What inventory dynamics have you seen in 2023 so far? What categories are relatively well-positioned vs those that are seeing a struggle in terms of bloat and age?
25.
What are your thoughts on the incremental improvements we’ve seen in supply chain and the implications this has on inventory planning? Is there a significantly material favourable position that these retailers are in vs the back end of 2022?
26.
How should retailers optimise CAPEX and selling costs in the long term? What impacts do you see from recent announcements on the raise of employee salaries by certain retailers within this space? What fundamental shifts in long-term strategy might we see for CAPEX spending and labour management?
27.
What is your growth outlook for the home improvement retail space for H2 2023 vs H1?
28.
Is there anything else you’d like to mention regarding the home improvement industry?
