As the summer sun shines, traditionally a season for DIY home improvement, Lowe's (LOW) finds itself in a precarious position.
LikeFolio data uncovers a worrying trend: chatter about maxed-out credit cards has nearly doubled over the past year, hitting record highs.
Meanwhile, the consumer demand for Lowe's, as indicated by purchase intent mentions, has taken a 17% hit year over year and a whopping 30% in the past quarter.
Rising Interest Rates and Resuming Student Loan Payments: A Double Whammy
The American economy is wrestling with high inflation and interest rates.
Add to this the resumption of student loan payments, and we're looking at a potential reduction in consumer spending that could hit various industries, including major retailers like Lowe's.
Credit Card Debt: A Ticking Time Bomb
Americans are drowning in credit card debt, with the total balance inching dangerously close to $1 trillion.
More than a third of U.S. adults now have more credit card debt than emergency savings. This financial strain on consumers could further dampen their spending on home improvement projects.
Cooling Housing Market: Bad News for Home Improvement Retailers
The housing market, which has been a beacon during the pandemic, is showing signs of cooling. Experts are predicting a significant drop by the second or third quarter of 2023.
This could be the largest housing correction in the post-World War II era. A cooling housing market could lead to a decrease in home improvement projects, affecting companies like Lowe's.
Conclusion: A Storm Brewing for Lowe's?
The convergence of rising interest rates, a cooling housing market, and financially strained consumers could pose significant challenges for Lowe's and its stock.
As consumers tighten their belts, discretionary spending on home improvement projects may take a hit.