Home Improvement Spree Props E-commerce Stocks: 5 Picks

The coronavirus outbreak has swelled the traffic to online shopping platforms with more people at home due to lockdowns. And the demand for home décor has also gone up significantly with people finding the time to refurbish interiors.

Surge in online shopping of home furnishing products has boosted e-commerce businesses, dealing a massive blow to brick-and-mortar retailers.

Online Delivery Caters to DIY Customers

The use of do-it-yourself (DIY) products in home improvement is lower when compared to work outsourced. With excess time in hand along with the availability of free pick-up and delivery options for online purchases, the demand for DIY home improvement products has grown. Per a Bank of America poll, more than 70% of 1.054 Americans said that they have decided to take up home improvement projects, with more planned for 2021.

Home improvement retailer The Home Depot, Inc. HD recently announced plans of opening three distribution centers in the Atlanta area over the next 18 months. This will help the company keep up with customer demand for fast and convenient deliveries. The company will invest $1.2 billion in supply-chain facilities over the next five years. And why not? The pandemic has underlined the importance of a strong and flexible supply chain even more to cater to online shoppers and curbside pickups.

In fact, this spike in demand for home furnishing products has benefited e-commerce platform providers like Shopify. The platform offers online stores and retail point-of-sale systems for several retailer who had been forced to close doors due to the lockdowns. For the quarter ending Jun 30, Shopify saw a 71% increase in the number of new stores created and its revenues rose 97% on a blockbuster 119% increase in gross merchandise volume sold on its platform.

Additionally, several home decor sites have been offering eye-catching home decor sales and deals since the virus has confined people indoors. AllModern, which offers several chic backsplash and floor tile options, has been offering up to 65% off on select items as customers look for DIY projects to take up.

Home Upgrades Push Sales in Q2

DIY projects and home upgrades are in trend, with ideas and products easily available online. Several home furnishing providers have tied up with e-commerce giants and hence have seen high sales even with stores closed.

Sherwin-Williams’ second-quarter earnings of $7.10 per share surpassed the Zacks Consensus Estimate of $5.69. Despite several stores being closed in April and May due to the coronavirus pandemic, the report shows unprecedented demand for architectural DIY paint products in the quarter. The decline in in-store sales was compensated with spike in demand from Sherwin-Williams retailing partners. Sales across Sherwin-Williams’ U.S. retailing network jumped 21% as consumers turned their attention to home upgrades.

Additionally, another home décor superstore, At Home Group Inc. HOME reported net sales of nearly$515 million for the second quarter of fiscal 2021, up 51% year over year. The company temporarily closed all 219 of its stores in March due to the pandemic. However, sales continued to climb, thanks to the buy-online-pick-up-in-store and partnership with national delivery service Pickup to offer contactless and next-day local delivery options.

Wayfair, which is scheduled to report second-quarter 2020 results on Aug 5, has an Earnings ESP of +43.47% and its sales are expected to record an improvement of 68.8% from the prior-year quarter.

5 Stocks to Buy

Given the encouraging home improvement industry scenario, we have shortlisted five home furnishing e-commerce providers that are poised to grow.

Tempur Sealy International, Inc. TPX develops, manufactures, markets and distributes bedding products. The company that belongs to the Zacks Retail – Home Furnishings industry has an expected earnings growth rate of 4.7% for the current year.

The Zacks Consensus Estimate for its current-year earnings has climbed 83.4% over the past 60 days. Tempur Sealy sports a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.

Home Depot operates as a home improvement retailer. The company that belongs to the Zacks Building Products – Retail industry has an expected earnings growth rate of 4.1% for the current quarter. The Zacks Consensus Estimate for its current-year earnings has climbed 2.3% over the past 60 days. Home Depot carries a Zacks Rank #2 (Buy).

Story continues