It’s not an accident that Home Depot and Lowe’s stores tend to open near each other.
It’s actually a practice called “clustering,” which can be explained.
“Businesses want to locate themselves near the center of their potential customer population to attract the greatest number of customers. When multiple competitors exist it would make sense, if they were working together, to spread out so that each competitor would have a share of the customer population,” wrote John M. Jennings president and chief strategist of ArchBridge Family Office.
Rivals, he noted, don’t work together, so that means they don’t divide geography logically.
“So, each competitor will simultaneously make the same decision to move to the best location,” he added. “…Basically, for various population density areas, there are only a few (maybe only one) optimal locations, and the mathematics of competition drives all competitors to the optimal location.”
That’s why CVS is usually near Walgreens, and why Costco and Sam’s Club often sit next to, or across the street from, each other. It’s a practice that forces rival brands to find new ways to differentiate themselves from one another.
Home Depot adds an edge over Lowe’s
While each company carries exclusive brands, many shoppers view Lowe’s and Home Depot as similar. I generally prefer Lowe’s because, in my experience, it has more staff available to answer questions and help locate products. That said, I live closer to a Home Depot, so convenience usually determines where I shop.
Home Depot, however, has a new partnership that will give customers a new reason to visit.
“Wahlburgers, for example, has partnered with licensee Adaptiv Provisions to open three food trailers outside Home Depot stores in Florida,” Restaurant Business reported.
That’s a small start, but it does offer Home Depot something that Lowe’s does not offer.
It’s a move that’s not dissimilar to Target’s partnership with Starbucks, a clear driver to the brand.
On many occasions, I have opted to visit Target over Walmart or Publix because I can get a coffee from Starbucks. Wahlburgers may be a more targeted product, but it could be a similar traffic driver for Home Depot.
“The brand does really well in captive market, and it’s another opportunity in a captive market to grow our footprint,” said Wahlburgers CEO Randy Sharpe.
Wahlburgers expects that it will expand its Home Depot partnership.
“It’s about knowing who you are [as a brand] and what works,” said Sharpe. “It’s a great brand. You have to pick the right real estate. You want the right traffic patterns. And you want to make sure you pick the right markets where it resonates well.”
Wahlburgers has partnered with Home Depot.
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Home Depot has struggled
While Home Depot grew its sales in its most recent quarter, the company performed below its guidance.
“Comparable sales for the third quarter of fiscal 2025 increased 0.2%, and comparable sales in the U.S. increased 0.1%. Net earnings for the third quarter of fiscal 2025 were $3.6 billion, or $3.62 per diluted share, compared with net earnings of $3.6 billion, or $3.67 per diluted share, in the same period of fiscal 2024,” Home Depot shared in its Q3 earnings release.
“Our results missed our expectations primarily due to the lack of storms in the third quarter, which resulted in greater than expected pressure in certain categories. Additionally, while underlying demand in the business remained relatively stable sequentially, an expected increase in demand in the third quarter did not materialize. We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand,” said CEO Ted Decker.
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Zacks analysts see the Q3 softness as part of an ongoing market problem.
“With customers prioritizing essentials and pro backlogs beginning to ease, the quarter’s results point toward a market that may be settling into a lower-demand equilibrium. The soft comparable sales, therefore, look less like a temporary disruption and more like an early signal of a structural shift shaped by housing constraints and persistent consumer caution,” they shared on Investing.com.
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Housing market hurts Home Depot
When the housing market slows, demand for Home Depot’s products generally follows. In addition, existing homeowners have been cautious with spending due to the overall economy.
- Sales remain historically weak: Existing-home sales have stayed close to multi-decade lows, with buyers hesitant amid high prices and rates, according to Newsweek.
- Home price growth cooling: U.S. home prices are rising at the slowest annual pace in years, a sign demand is weakening, Investing.com reported.
- Affordability challenges persist: High mortgage rates and elevated home prices keep many buyers on the sidelines, according to Forbes.
- Inventory slowly rising: More homes on the market is easing sellers’ leverage and signaling a shift toward balance, Florida Realtors reported.
- “Lock-in effect” slows turnover: Many homeowners reluctant to sell because they hold below-market mortgage rates, limiting inventory and transaction volume, shared Housing Wire.
“Realtor.com expects the housing market to stabilize in 2026, helped by slightly lower mortgage rates, rising incomes and growing inventory. Rates are projected near 6.3%, keeping recovery slow. Home prices may rise about 2.2%, but inflation will outpace them. Listings should increase, affordability should improve and sales may inch up despite lingering lock-in effects,” according to Housing Wire.