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
May 24, 2024 - Industry to Rebound, Then Growth Tapers off
- The home center and hardware store industry is expected to see slight sales growth this year, but demand is projected to improve more robustly in the following four years. The industry’s year-over-year sales increased by 6.9% in 2022 before dropping to -5.2% in 2023, according to Inforum and the Interindustry Economic Research Fund, Inc. Sales growth is projected to rise slightly to 1.1% in 2024, then rise to 7.1% in 2025. The industry will then see steady but gradually tapering growth with rises of 6.9% in 2026, 5.8% in 2027, and 5.3% in 2028, according to Inforum and the Interindustry Economic Research Fund, Inc.
- A recent downturn in Home Depot’s sales could signal that a decade-long surge in home improvement spending is softening, according to The Wall Street Journal. In May, Home Depot reported first-quarter revenue of $37.26 billion, down 4.2% from the same period a year earlier. The home improvement giant also revised its full-year guidance downward to a sales decline between 2% and 5% from a February estimate of flat 2024 growth. Some industry observers suggest homeowners may have completed many of their home projects during the pandemic. Consumers may also be pulling back on their spending amid growing economic uncertainty and high interest rates and inflation. Remodeling activity is a demand driver for hardware, plumbing, and HVAC supplies.
- Sales of existing US homes decreased by 1.9% in April from March and were also down 1.9% year-over-year, according to the National Association of Realtors (NAR). High home prices and interest rates may be continued barriers to entry for some potential homebuyers. The median price for all types of homes in April was $407,600, up 5.7% from a year earlier. As of May 16, 2024, the 30-year fixed-rate mortgage averaged 7.02%, up from 6.39% for the same period in 2023. NAR chief economist Lawrence Yun said, "Home prices reaching a record high for the month of April is very good news for homeowners. However, the pace of price increases should taper off since more housing inventory is becoming available." Existing home sales help drive demand for home improvement spending. Homeowners often make renovations before putting their house on the market, and buyers typically do remodels and upgrades before moving in.
- A lack of affordability in the US housing market is prompting a building boom of for-rent homes, according to The Wall Street Journal. Amid high interest rates and home prices, many affluent potential home buyers are priced out of the single-family and townhome markets. In 2023, US builders completed 93,000 for-rent homes - the most ever in a single year and up 39% over 2022, according to John Burns Research and Consulting. There are another 99,000 for-rent homes currently under construction, but the breakneck pace of development is expected to slow as lending standards tighten. However, some industry watchers believe any lull in built-for-rent home demand will be brief as economic conditions make renting a better financial option than buying. As of March 2024, the average monthly mortgage payment was 38% higher than the average monthly apartment rent, according to CBRE.
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