Finimize - 🏚 Home-wrecking results

What’s going on here?

Lowe’s took a hacksaw to its yearly forecast on Tuesday – a move that didn’t surprise observers.

What does this mean?

Home Depot’s recent sorry performance gave investors a clue that something had gone awry in the DIY world, and Lowe’s fate has driven the point home. Granted, the companies’ stories weren’t totally identical last quarter: Lowe’s managed to outperform analysts’ sales predictions, after all, while Home Depot clocked up a near-record miss. But the overarching narratives were eerily similar: as customers tighten their purse strings, discretionary spending has taken a backseat to increasingly costly essentials – and the home renovation boom triggered by the pandemic has truly fizzled out. That’s not exactly the stuff of home-improvement fairy tales, so Lowe’s followed in Home Depot’s footsteps, pruning its sales and profit forecasts for the year.

Why should I care?

For markets: Bad, but not worst.

Lowe’s stock actually jumped after the announcement, probably because its update wasn’t as grim as its competitor’s. See, Lowe’s cut less from its forecast than Home Depot did, and the firm’s more effective cost control meant it was better than its rival at maintaining profit margins. Lowe’s professional business segment continued to flourish too – and pro customers are known to visit more often, spend more, and stick around, making them the ultimate retail trifecta. Put it all together, then, and you’re a step closer to understanding why Lowe’s stock has outperformed Home Depot’s by 10% this year.

The bigger picture: Building confidence.

Despite the rough patch, Lowe’s seems hopeful about its long-term outlook – and that confidence could be well-founded. Data out last week showed that homebuilder sentiment is warming up for the first time in almost a year, with a lack of homes spurring construction hopes. If that trend continues, demand for home improvement goods could flower once again, turning Lowe’s current gloom into a high bloom over time.

What’s going on here?

Recent data suggests that global container production, once experiencing roomy growth, has now found itself in a tight spot.

What does this mean?

Just yesterday, it seems, shipping giants were scrambling for containers, thanks to a pandemic-induced crunch and simultaneously roaring demand. But now the pendulum has swung back: demand for goods has plunged off the proverbial cliff, leaving port owners playing real-life Tetris in a bid to store their record glut of unused boxes. Naturally, that’s seen container production take a nosedive: data from a maritime consultancy showed the number of 20-foot containers (the industry standard) fell a chunky 71% last quarter from the year before, dropping to around 300,000. And the outlook isn’t sunny going ahead, either: Maersk, one of the world’s biggest shipping behemoths, has paused dry container production till at least 2024.

Why should I care?

The bigger picture: Headwinds and countercurrents.

This container crunch mirrors the current state of trade and – by extension – the whole global economy right now. After all, the World Trade Organization expects this slump to be around for at least the rest of the year, and recent economic indicators seem to agree. Data out Tuesday showed a measure of eurozone business activity missed expectations and fell to a three-month low in May, weighed down by the flagging manufacturing sector. And while the IMF now thinks that calm-and-carrying-on Brits might dodge a recession, that doesn't mean they're in for an economic boom anytime soon.

Zooming out: Digital docking station.

As shipping fortunes ebb, port businesses are anchoring their hopes in automation. And China – a formidable player in global shipping – is leading the charge, already automating an increasing number of dock operations. The US isn’t just watching from the shoreline, though: it’s nudging the American industry to follow suit. With any luck, then, this digital transformation could offset costs and help better weather any future pandemic-style blasts.