Insight Flash: Home Improvement Retailers, Rent-to-Own, Mattress/Bedding, and Decor Momentum Could Signal Stronger 2025 Outlook
As 2024 came to a close, a number of economic indicators improved, contributing to moderate optimism for 2025 and paving the way for stronger home & garden sales. Home sales ended the year strong, with existing home sales increasing 2.2% and new home sales growing 3.6% and home prices for both existing and new homes continue to rise. These trends gave homeowners increased confidence in investing in their homes with home improvement projects and refreshing home furnishings.
While industry outlook is positive, affordability remains a significant factor and a drag on Home and Garden. During the December Federal Open Market Committee meeting, rates were cut by 25 basis points, though the Committee also signaled a slower pace for rate cuts in 2025. Further, the December Consumer Price Index rose 2.9% Year-Over-Year, up from November’s 2.7% and above the Committee’s 2% target. The Trump Administration has indicated that housing affordability is a priority, but it’s unclear what the mixture of reduced regulation, threats of tariffs, and immigration restrictions will mean for the broader housing market.
Home Improvement Trends: Recovery in Home & Garden
Consumer Edge data shows that in Q4 2024, the US Home and Garden industry experienced its best quarter since Q3 2022. The DIY home improvement subindustry’s low- to mid-single digit declines over the past two years gave way to 1% growth in the period as the Covid-19 pull-forward in repair and remodel spend continues to normalize. Further, declines in the home furnishings subindustry moderated with a 450 basis point sequential improvement as wage growth has begun to outpace inflation.
DIY Home Improvement Spend Remains Significantly Elevated Vs. Pre-Pandemic, While Home Furnishings Nears 2019 Levels
While growth in the Home and Garden industry has been negative the past two years, spend still remains above pre-pandemic levels, in large part due to significant DIY home improvement growth in 2020 and 2021. While the home furnishings subindustry largely returned to pre-pandemic levels in 2024, CE data shows that the home improvement subindustry was still 41% above 2019 levels. This divergence is likely driven by the inelastic nature of some major home improvement product categories.
DIY Home Improvement Spend Strongest in the South During Q4, A Tailwind for Lowe’s, Tractor Supply, and Floor and Decor
During Q4, DIY home improvement spend was the strongest in the South, growing 3% YoY. This outperformance was likely driven by strong population migration to Southern States, including Florida, Texas, Tennessee, and the Carolinas during the year. The Midwest also posted 1% growth for the quarter, while the Northeast was flat and the West fell by 1%.
While Home Depot remains the market leader across nearly every region, the South is incredibly important for retailers like Lowe’s, Tractor Supply, and Floor and Decor; more than 50% of their sales are from that region in Consumer Edge data. If outperformance in the South persists, those retailers could be well positioned in the year ahead. Harbor Freight and Floor and Decor both posted solid growth during the quarter in the South, likely due in part to their rapid store openings over the past several years. Conversely, Home Depot’s and Lowe’s performance in the region was in-line with the average.
The Midwestern DIY home improvement subindustry is unique, with Menards leading both Home Depot and Lowe’s as the top home center in the region. Menards underperformed all major retailers in the Midwest during the quarter, as Sherwin-Williams and Harbor Freight drove growth there.
Outside of the national home improvement competitors, a number of regional or niche brands experienced strong growth during Q4. Highlights came from garage, entry door, window, and pool/spa suppliers, including DH Pace, A1 Garage, Andersen Windows, and Pinch A Penny. Growth from these firms could indicate that the consumer may be shifting back into certain larger projects that had been delayed due to high interest rates. Further, DTC and online stores for home improvement brands, including Black and Decker and Camp Chef, experienced rapid growth during the quarter.
Midwest includes IA, IL, IN, KS, MN, MO, ND, NE, OH, SD, and WI
Northeast includes CT, MA, ME, NH, NJ, NY, PA, RI, and VT
South includes AL, AR, DC, DE, FL, GA, KY, LA, MD, MS, NC, OK, SC, TN, TX, VA, and WV
West includes AK, AZ, CA, CO, HI, ID, MT, NM, NV, OR, UT, WA, and WY
Rug/Flooring Underperforms; Rent-to-Own, Mattress/Bedding and Décor Outperforms as Consumers Manage Home Spending
The Home Furnishings subindustry ended the year on a high note, improving considerably compared to Q3, though year-over-year growth remained negative. Diving deeper, we can classify companies by product (furniture, mattresses) or category (kitchen, decor). Some companies, such as Wayfair, offer a wider range, acting as diversified one-stop shops.
Flooring/rug companies declined the most in Q4 (-10%), followed by diversified merchants ( -7%). The flooring/rug weakness was driven by large declines for Empire Today and Rugs.com, as rising 30-year mortgage rates in Q4 caused housing affordability to remain a headwind for the industry. Wayfair and Crate and Barrel’s CB2 contributed to weakness among diversified home furnishings retailers. Smaller brands Grandin Road and the Sharper Image also felt the pain from the tough macro environment. Contributing to the decline for diversified companies was a focus on lower ticket items as consumers continue to grapple with economic uncertainty.
Driving the improvement in the home furnishings market were companies in the rent-to-own, mattress/bedding, and décor spaces. The rent-to-own sector, though representing a small portion of the category, achieved +6% growth driven by UPBD’s Acima, which capitalized on consumers’ desire to lease instead of buy products, as they struggle with stretched budgets. The mattress/bedding segment grew +4%, likely due to an increased focus on sleep quality and wellness. This trend saw major retailers like Mattress Firm and Sleep Number expand premium lines, while DTC brands Helix Sleep and Cozy Earth achieved strong growth with personalized and sustainable products.
In the décor category, TJX’s Homegoods and Homesense brands thrived by offering affordable stylish home décor during inflationary times, while specialty retailers like Pura Scents grew by tapping into the home fragrance market.
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