Is Home Depot The Real Reopening Trade?

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Is Home Depot The Real Reopening Trade?

Last year the US housing stock went through a huge upgrade cycle amid lockdowns and business restrictions, but will that continue as more Americans get vaccinated and are able to travel/go out? We turned to Google Trends query volumes to find out, as people usually search for an item before making a purchase. Here’s what we found:

#1: “Home Depot” (blue line) and “Lowes” (red line) from January 2019 – present:

  • The high in searches for “Home Depot” and “Lowes” was in April/May 2020 after stay-at-home orders last March. They were up 30 pct and 43 pct respectively from 2019’s peak during the week of Black Friday. More time spent at home encouraged people to make improvements in/around their residences.
  • Interest in both stores usually peaks for the year during the week of Black Friday, as in 2019. That was not the case last year due to the unique nature of the public health crisis, but queries still jumped during that holiday week and were up 13-14 pct compared to the same period in 2019.
  • Searches have been rising since February and are up 3 pct for “Home Depot” and 11 pct for “Lowes” compared to their highest levels in 2019.

Takeaway: Americans are growing more interested again in fixing up their homes even after all the work they did last year. In fact, these home improvement stores are currently more popular than peak interest in 2019.

#2: “Outdoor furniture” US Google query volumes over the last 5 years:

  • Searches for “outdoor furniture” usually hit their highest levels in April-June each year, but their peaks saw little growth from 2016 to 2019.
  • Queries reached a 5-year high in May 2020 and were up 82 pct from the prior high in May 2019.
  • Partial data for March shows searches are tracking to reach fresh 5-year highs in the coming weeks.

Takeaway: as much as Americans upgraded their outdoor furniture last year during lockdowns, 2021’s data shows this trend is not over yet.

#3: “Outdoor grill” (blue line) and “Outdoor playset” (red line) over the last 5 years:

  • The typical May peaks in searches for “outdoor grill” only grew slightly each year from 2016 to 2019. Last year trounced those levels, with queries up 52 percent in May compared to the prior 5 year high in May 2019. Partial data for March shows queries are surging again and look on track to post a new 5 year high.
  • Searches for “outdoor playset” doubled from the peak in April 2019 to the new 5-year high in April 2020. Partial data for March shows it’s on track to beat last year’s levels.

Takeaway: like outdoor furniture, demand for outdoor grills and playsets is not reverting to pre-pandemic norms but rather poised to make fresh highs.

#4: “Lumber” from January 2019-present:

  • Searches for “lumber” hit their highest levels in May-June 2020 and were up 30 pct from 2019’s high.
  • Queries are already on track to make a new high, just 5 pct away from the top.

Takeaway: Americans are usually most interested in lumber during May/June during Spring remodeling season, and searches already almost match last year’s peak levels in late March. Such robust demand should continue to put upward pressure on lumber prices.

#5: “House paint” and “Wall paint” over the last 5 years:

  • Searches for “wall paint” and “house paint” showed essentially no growth from 2016 through 2019.
  • Queries for “wall paint” and “house paint” jumped to a 5-year high in April/May 2020, up 35 pct and 39 pct from their old 5-year highs.
  • While interest in “wall paint” is on the wane, searches for “house paint” are breaking out to a new 5-year high right now.

Takeaway: while demand for interior paint is falling back down to its normal levels, it is surging again for exterior paint. Perhaps homeowners already painted the walls inside their houses while they were stuck inside last year and can now focus on freshening up the outside as they also purchase outdoor furniture and grills with Spring now here.

Bottom line: despite significant demand for home improvement projects last year, the home upgrade cycle is not over as shown by Home Depot and Lowe’s rallying to new all-time highs today. As much as Americans are craving outside experiences whether it be traveling or going out to eat, they are still sprucing up their homes and backyards. No doubt stimulus checks better enable them to do it all, but the data we’re showing you today is not consistent with the idea Americans are about to spend the next 9 months out to dinner every night or taking multiple vacations. Why would they spend so much time Googling items for their homes if that was their plan?

Put more bluntly, can “reopening trades” work if HD and LOW are making new highs right now? In our view, the short answer is “sure, but it’s going to take a little time”. As we’ve outlined in so many of these Data sections over the last year now, the American consumer had reacted to the pandemic by making the best of a bad situation in real time. That’s still happening: spring weather plus stimulus money means home upgrades, especially outdoor items. Travel and leisure will come – we’ve recently shown you that Google trend data, and it’s accelerating. But the here-and-now trend – and surprisingly so, honestly – is how Americans aren’t as anxious to leave their homes as one might have thought they would be.