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 11,200 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 500 workers, and generates about $213 million annually, while the average hardware store employs about 10 workers and generates $2 million annually.

    • The home center and hardware store industry consists of about 11,200 companies that employ about 917,000 workers and generate about $358 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
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Nov 17, 2022 - Lowe’s, Home Depot Get Q3 Boost from Pro Sales
                                • Home centers Home Depot and Lowe’s managed to pull off sales wins in the third quarter even as inflation was rising, according to Construction Dive. Home Depot’s sales rose 5.6% year over year to reach $38.9 billion. Lowe’s Q3 sales of $22.5 billion were up 2.4% over Q3 2021. Both retailers said sales growth in Q3 was strongest for their professional customer segments as consumers cut back on DIY spending due to high inflation.
                                • High interest rates, elevated building materials prices, and a lack of affordable inventory pushed home builder sentiment lower in November, according to the National Association of Home Builders (NAHB). Homebuilder sentiment, as measured by the NAHB/Wells Fargo Housing Market Index (HMI), fell five points to 33 in November 2022 from 38 in October, marking the 11th consecutive monthly decline. Any HMI reading over 50 indicates more builders see conditions as good than poor. Amid weak buyer traffic, 37% of homebuilders reported cutting prices in November compared to 26% who reduced prices in September, according to the NAHB.
                                • The Dodge Momentum Index (DMI) increased 9.6% in October 2022 to 199.7 (2000=100), up from the revised September reading of 182.2. The DMI Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which has been shown to lead construction spending for nonresidential buildings by a full year. On a monthly basis, the commercial planning component increased by 13%, and institutional rose by 2.9%. An increase in office and lodging projects boosted the commercial planning pipeline. The institutional sector was mixed amid a growing pipeline of recreation and education projects, but the number of healthcare and public planning projects declined. Developers and project owners continue to see healthy demand, despite recession concerns, although continued inflation, high interest rates and materials costs, and labor shortages have the potential to blunt the flow of new projects.
                                • Nonresidential construction firms’ backlogs contracted in October, according to the Associated Builders and Contractors (ABC). The ABC’s Construction Backlog Indicator dropped to 8.8 months in October, down from 9 months in September. However, backlogs were up compared to October 2021’s 8.1 months. October’s weakness was led by the commercial and institutional segment, which fell to 8.8 months in October from 9 months in September. The heavy industrial segment’s backlog grew from 8.5 months in September to 10.3 months in October. The infrastructure backlog rose from 7.2 months to 8.9 months over the same period. However, despite a shrinking backlog, the ABC’s Construction Confidence Index for sales climbed to 57.2 in October over September’s reading of 55.1. A Confidence Index sales reading of 50 or more indicates most contractors are optimistic about sales.
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