Home Centers Cutting Back on Sales Promotions

Atlanta, GA, Aug. 22, 2008--Home Depot and Lowe's are pulling back on margin-eroding promotions.

The home centers are facing their economic conditions in decades and are refocused on offering their lowest prices every day in spite of rising fuel and raw material costs.

After experimenting with aggressive promotions earlier in the housing downturn, both retailers have backed away. The moves indicate a recognition by the retailers that it will be several quarters before demand picks up.

Even though Lowe's and Home Depot have recently expressed hope that housing sales may bottom soon, few industry experts expect homeowners in the next year or two to resume the kind of major kitchen and bath renovations that fueled home- improvement sales earlier this decade.

Lowe's and Home Depot can more easily pull back on promotions than other retailers because they don't sell as much merchandise that goes out of fashion.

Home Depot believes that when customers believe the retailer will offer values every day, they feel better about shopping there.

Home Depot, which a year ago provided whole-house carpet installation for $99, is now charging $199. It has also pulled back on some of its credit promotions - offering a standard no payment, no interest promotion on purchases of at least $299 on its proprietary credit card for a 6-month term instead of the 12-month offer it has occasionally made.

Lowe's, meanwhile, recently raised the price on its whole-house carpet installation deal by $50 to $249 after the promotion hurt gross margins in the first and second quarters.