Home Depot and Lowe's benefit from bored shoppers hammering away at home – as remodeling projects absorb entertainment dollars

• Shoppers continue to flock to Home Depot and Lowe's, as home improvement projects have eclipsed other forms of entertainment spending.
• Investment firm Wedbush Securities highlighted this trend in an August 10 note.
• According to analysts, "reduced travel and entertainment spending" has prompted a shift to home improvement spending.
• Both Home Depot and Lowe's report second-quarter earnings next week.

Back before the coronavirus pandemic, people went to the movies, ate out at restaurants, and traveled to faraway places on vacation.

Now that cinemas are shuttered, indoor dining is at reduced capacity, and flights are a risky proposition, consumers' "fun" budgets are increasingly going towards home improvement projects.

Wedbush Securities equity research analysts Seth Basham and Nathan Friedman highlighted this trend in an August 10 note about two giants in the industry: Home Depot and Lowe's. Both home improvement retailers have seen major gains from a "spend shift" that's occurred because of "reduced travel and entertainment spending," the analysts wrote.

The shift in consumer spending habits has also launched both retailers into major success during the pandemic, the firm said, as both companies' status as essential retailers allowed them to stay open – even as stay-at-home mandates were introduced across the US in March and April.

"Sales trends likely accelerated in May and June even as competitor stores reopened as homeowners tackled home improvement projects to support both a work-and-play-from-home environment," analysts said.

Wedbush Securities also noted that Home Depot and Lowe's have so far been protected from rising unemployment and plummeting consumer confidence in the economy. In fact, a future spike in COVID-19 cases could play to both companies' advantage.

"We believe that re-accelerating coronavirus cases may perpetuate the stay-at-home trend, driving continued outsized category sales growth," analysts wrote.

Home Depot disclosed first-quarter sales of $28.2 billion when the company last reported earnings in May, up 7.1% year-over-year. Lowe's increased sales by 12.1% over the same period to $19.6 billion. The companies are set to report second-quarter results on August 18 and August 19, respectively.

Home Depot and Lowe's have seen a massive windfall from the coronavirus pandemic so far, with spending and foot traffic at both stores spiking since March.

As both companies' consumer bases continue to adapt to a COVID-19 world, Home Depot and Lowe's are additionally branching out and launching initiatives tailored to entertaining stuck-at-home shoppers.

Prior to the pandemic, Home Depot hosted in-store workshop classes for children. Now it is donating workshop kits to schools and organizations like Boys & Girls Club of America, ToolBank, and YMCA to allow children to continue to learn from home. Parents can also purchase the kits in-store.

Meanwhile, a Lowe's in Charlotte, North Carolina, hosted a free movie night in its store parking lot, screening "The Secret Life of Pets" and "The Pursuit of Happiness" for families. The event raised donations for a nonprofit Local Initiatives Support Corporation.

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