Macro and consumer demand uncertainty

“We believe that we have positioned ourselves to meet the needs of our customers in any environment. The investments we've made in our business have enabled agility in our operating model.”

“But again, what more recently has happened is a broader concern with the macro economy. There's just a lot of noise with political and geopolitical environment, unemployment ticked up, inflation keeps eating away at disposable income.”

“During the quarter, higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects.”

“As you heard from Ted, during the second quarter, the higher interest rate environment and greater macroeconomic uncertainty pressured overall project demand.”

“Again, these are consumers who have seen their home values go up 50% in the last four years, their home equity has increased almost 70% since the -- right before the pandemic. So that translates to over $13 trillion. Equity values have been strong, jobs are strong, earnings are strong.”

“However, the higher interest rate environment and greater macroeconomic uncertainty continues to pressure overall project demand.”

“And while there are signs that the home improvement market is on the way towards normalization, Uncertainties still remain.”

“I think from the macro, the worst concerns I think have passed. We've gone from a dynamic of where we were going to have a near certain recession and stock market correction in early April to where today stock markets fully recovered.”

“In particular, and as you heard from Ted, we are well-positioned to navigate the current macroeconomic environment.”

“As we look to the remainder of the year, we are confident in our ability to manage through the macroeconomic environment as it stands today.”

“When we talk generally, though, to our customers, each of our sets of consumers and pros, the number one reason for deferring the large project is general economic uncertainty.”

“We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”

“But again, the economic uncertainty continues largely now due to living costs, affordability is a word that's being used a lot, layoffs, increased job concerns, et cetera.”

“We believe the consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand.”

“We still believe we have one of the healthiest consumer segments in the whole economy. But again, the economic uncertainty continues largely now due to living costs, affordability's a word that's being used a lot. Layoffs, increased job concerns, et cetera.”

“what may drive us to the lower end of the range would be if the market is not performing as well. And the #1 driver of that would be continued consumer uncertainty.”

“Our customers also tell us they have concerns over general economic uncertainty, including inflation, growing job concerns and higher financing costs.”

“American families continue to deal with a lot. These pressures are clearly weighing on them, and they're looking for a refuge from the everyday stress that they're feeling.”

“Consumers have shown remarkable resilience in the face of multiple challenges over the last several years, and they remain resilient today.”

“Given the significant headwinds they have faced with inflation over the last few years, consumers continue to focus on value as they work hard to manage their household budgets.”

“And while our performance has exceeded our expectations so far this year and our view of the consumer remains largely the same, the range of possibilities and the macroeconomic backdrop in consumer data and in our business remains unusually high.”

“I think the headline is at the start of your question, we see a consumer that's largely consistent with how we would have described the consumer over the last couple of quarters. Consumer that's been resilient overall in their spending and flat in spite of significant inflation over the last couple of years, a consumer that's choiceful.”

“The sales decline in February we reported this morning reflects a mix of factors. Consumers continue to show a willingness to splurge on newness. We saw this play out around Valentine's Day, where we saw record-high sales. Yet, as we've discussed before, persistent economic uncertainty has consumers taking a cautious approach to spending, particularly in discretionary categories.”

“in February, we saw record sales performance on Valentine's Day. But overall topline performance for the month was soft as cold weather affected Apparel sales and consumer confidence declined impacting our discretionary assortment more broadly.”

“consumers have been choiceful in their buying decisions, and recent declines in consumer confidence have made them even more cautious.”

“In the first quarter, our team and our business faced an exceptionally challenging environment that affected our performance with declines in both traffic and sales, most notably in our discretionary categories.”

“For several years now, we've seen pressure in our discretionary businesses as spending adjusted down from elevated levels during the pandemic, and then moved further away in the face of historically high inflation and needs-based categories.”

“In planning for the remainder of the year, we believe it's prudent to expect that current top line pressures will continue in the near term.”

“As we look ahead, we also acknowledge that the broader operating environment remains uncertain.”

“with consumers weighing multiple headwinds and tailwinds and recent dips in consumer sentiment, we continue to place a premium on flexibility not wanting to swing too hard too quickly despite the early signs of momentum we're seeing.”

“While consumers have proven to be resilient so far, sentiment has been declining recently, and we're keeping a close eye on their spending behavior.”

“At the beginning of the year, our full year outlook reflected our expectation that macro and consumer trends in 2024 would be similar to the back half in 2023. That assessment has turned out to be accurate, and yet there still remains a great deal of uncertainty, particularly around interest rates and inflation.”

“As it relates to the interest rate environment, so for us, it's difficult to know at what absolute interest rate level we're going to see our consumers fully engage or how long the demand will lag the actual rate cuts that we're seeing.”

“Look, I think for us, when we think about our guidance change for the year, it really comes down to just being prudent and being cautious based on the macro environment and the overall customer sentiment specifically around big-ticket DIY discretionary spend.”

“But as Marvin mentioned, the home improvement backdrop remains challenging and consumer sentiment remains weak.”

“But from an overall macro standpoint, we expect the conditions to remain challenging in 2025, as we talked about in the prepared remarks, and all that's been taken into consideration as we looked at a flat home improvement market and then where we fall relative to that.”

“Even though short-term interest rates have started to come down, this remains a challenging home improvement market. Mortgage rates are higher than they've been in more than two decades, creating a significant gap between today's rates for homebuyers and the lower rates many homeowners currently enjoy.”

“We are very pleased with our performance in 2024, in a very difficult home improvement macro environment.”

“But there is still a good deal of near-term market uncertainty around the timing of an inflection in the home improvement market, especially for larger ticket discretionary spend.”

“We're still working through some short-term challenges including elevated mortgage rates, cautious consumer affordability remains a pressure point that results in the lock-in effect that we've been seeing and also a depressed housing market.”

“Turning to the macro environment. Homeowners remain financially healthy supported by strong balance sheets, wage growth, and low unemployment.”

“In uncertain times, our members have historically placed even greater importance on the value of high-quality items at great prices, and our teams will continue to rise to this challenge by leveraging our global buying power, strong supplier relationships, and innovation.”

“As we look ahead to the remainder of this fiscal year, headwinds from foreign exchange look likely to continue.”

“Our operations and merchandising teams did a fantastic job delivering strong operating results despite the uncertain macro environment.”

“As we look ahead to fiscal year 2026, despite the current macroeconomic uncertainty, we remain confident in our ability to grow market share by continuing to deliver exciting, high-quality items at the best value for our members.”