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 10,700 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 10,700 companies that employ about 859,000 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
                                Source: Vertical IQ and Inforum

                                Recent Developments

                                Jan 23, 2024 - Price Growth Outpaces Wages
                                • In Q4 2023, producer prices for building materials and supplies dealers increased slightly. Over the same period, hardware store wages declined moderately. A loosening of the US labor market may help ease retailers’ margin pressures from rising wages. Home center and hardware store employment in Q4 decreased slightly compared to a year earlier.
                                • Home remodeling spending is expected to weaken in 2024 but may hit bottom near the end of the year, according to the Leading Indicator of Remodeling Activity (LIRA) report released in January by the Joint Center for Housing Studies at Harvard. Homeowner improvements and repairs are expected to decrease by 1.2% to $464 billion in the first quarter of 2024 compared to Q1 2023. In the second quarter of 2024, remodeling spending will drop to $454 billion, down 6.3% from Q2 2023. Spending will then decline to $452 billion in Q3 2024, down 7.8% from Q3 2023. However, in the fourth quarter of 2024, year-over-year spending is forecast to drop 6.5% to $450 billion. The Joint Center expects that by the end of the year, improvements in homebuilding activity and lower interest rates may help slow the steady decline in remodeling spending. Kitchen remodels are a key demand driver for new appliance purchases.
                                • Sales of existing US homes decreased by 1% in December from November and were down 6.2% year-over-year, according to the National Association of Realtors (NAR). NAR chief economist Lawrence Yun said, "The latest month's sales look to be the bottom before inevitably turning higher in the new year. Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months." Existing home sales are a demand driver for home centers and hardware stores, as homeowners often make improvements before putting houses on the market. Home buyers typically remodel before moving in.
                                • Because the housing market is such a crucial segment of the US economy, its current weakness can be a drag on adjacent industries, including home improvement, according to The New York Times. High home prices and interest rates have reduced home sales, and homeowners with a low mortgage rate are reluctant to sell. About 80% of homeowners with a mortgage have a rate under 5%, and a quarter of homeowners have a rate under 3%, according to Redfin. Historically, homeowners who can’t afford to upgrade to a new home opt to renovate, but many consumers postponed improvements in 2023 because financing them was too expensive.
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