Home Centers & Hardware Stores
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 10,800 home center and hardware store companies in the US sell merchandise related to home repair, maintenance, and improvement. Hardware stores generally carry full lines of home repair and maintenance products, but may carry little to no lumber or building materials supplies. Home centers typically carry lumber and building materials in addition to traditional hardware. Companies may offer installation, project management, equipment rental, repair, or warranty services. Customers include DIY (do-it-yourself) customers, DIFM (do-it-for-me) customers, and commercial customers (builders, contractors).
Competition From Alternative Sources
Home centers and hardware stores compete with a variety of alternative sources, including building supply distributors; mass merchandisers; warehouse clubs; design centers and showrooms; and mail order and online retailers.
Complex Inventory Management
The sheer volume of individual stock keeping units (SKU) managed by home centers and hardware stores is staggering.
Industry size & Structure
The average home center employs 490 workers, and generates about $233 million annually, while the average hardware store employs about 15 workers and generates $4 million annually.
- The home center and hardware store industry consists of about 10,800 companies that employ about 898,000 workers and generate about $208 billion annually.
- The home center sector is highly concentrated; the four largest firms account for over 96% of sector sales. The hardware store sector is more fragmented; the 50 largest firms account for 41.5% of sales.
- Large companies include Home Depot, Lowes, and Menards. Thousands of hardware stores operate independently under purchasing cooperative brand names, such as Do It Best, Ace, and True Value.
Industry Forecast
Home Centers & Hardware Stores Industry Growth
Recent Developments
Sep 23, 2024 - Home Centers to Benefit from Fed Rate Cut
- At its meeting in September, the Federal Reserve voted to reduce interest rates by half a percentage point, which would put the benchmark federal funds rate between 4.75% and 5%, according to The Wall Street Journal. Projections of fed officials’ moves suggest another four quarter-point cuts will come next year, which would bring the federal funds rate down to 3.5% by the end of 2025. Home-improvement retailers will benefit if lower interest rates translate into increased remodeling spending, according to Business Insider. Home Depot and Lowe’s have seen their fortunes erode as high interest rates have prompted homeowners to postpone big-ticket projects. High interest rates have also curtailed existing home sales, which are a key driver of remodeling demand.
- The number of building permits issued for single-family, privately-owned housing units, a demand driver for building inspection services, increased 2.8% month-over-month but declined 0.5% year-over-year in August 2024. Single-family housing starts grew by 15.8% month-over-month and increased 5.2% year-over-year in August. Single-family housing completions dropped 5.6% month-over-month but grew 8.4% year-over-year in August. The August rise in housing starts was helped by moderating interest rates. However, builders still face supply-side headwinds, including labor and lot shortages and stubbornly high prices for some types of building materials, according to the National Association of Home Builders (NAHB).
- Sales of existing US homes decreased by 2.5% in August from July and were down 4.2% year-over-year, according to the National Association of Realtors (NAR). Median existing home prices moderated from July’s all-time high, but August’s median home price rose 3.1% to $416,700 compared to August 2023. NAR chief economist Lawrence Yun said, “Home sales were disappointing again in August, but the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months.” Existing home sales are a demand driver for remodeling spending as sellers often make improvements before putting homes on the market, and buyers renovate before moving in.
- The US home improvement market is expected to remain solid over the next few years, according to FMI’s third-quarter 2024 North American Engineering and Construction Outlook. Home improvement project spending will rise 4% in 2024 as homeowners primarily focus on maintenance and repairs amid high materials costs and interest rates. Home improvement is projected to moderate to 3% annual growth in 2025 and 2026 before rising 4% in 2027 and 6% in 2028. The median age of an owner-occupied home is more than 40 years, which helps drive home improvement spending. To keep new home prices lower amid higher interest rates, builders have reduced custom and luxury options in recent years, which could spur buyers to upgrade newer homes.
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