The Thursday Show: Do the industry's shipping problems have a solution? Plus: Sophie Lou Jacobsen is on the rise

Business of Home Podcast - Business of Home, Dennis Scully

The Thursday Show explores pressing issues in the home industry, including ongoing shipping challenges, recent earnings from Home Depot and

Key takeaways

• High mortgage rates continue to stall the housing market, impacting renovation spending despite strong sales at Home Depot and Lowe's.
• Home Depot and Lowe's reported modest comp sales growth, reflecting broader stagnation rather than optimism in residential construction or remodeling.

Main topics

• Housing market stagnation due to high mortgage rates
• Earnings performance of Home Depot and Lowe's

Notable quotes

"The housing market is still frozen. They're just sort of chugging along." – Home Depot on earnings call

Conclusion

Despite economic headwinds and logistical hurdles, the home industry continues to adapt through

Transcript preview

Speaker 3 (0:07) This is Business of Home. I'm Dennis Scully, and welcome to the Thursday Show. Later on, I'll be speaking with designer Sophie Lou Jacobson about her buzzy glassware brand. But first, we're going to catch up on the news, including earnings from Home Depot and Lowe's, the industry's freight problem, and why a tech mogul is trying to invent a new design style. To do all that, I'm joined by Business of Home's executive editor, Speaker 2 (0:33) Fred Nikolaus. Hi, Fred. Hi, Dennis. How's it going? Great. How are you doing? Doing good. I just got back from the dentist, so I'm nice and numb to get through this episode, which has tariffs in it, which is... That's where I'm at right now. How about you? Well, Speaker 3 (0:48) I wish I had something to numb the pain from everything that's going on, frankly, Fred. So I envy you that Novocaine, but I appreciate you working through it for Speaker 2 (0:57) the show. The show must go on. Speaking of that, let's talk about Monday's episode, a conversation with designer, oh, I should say decorator, sorry, decorator Alex Papakostidis, Upper East Side classic. What a guy. What a lovely story. I loved hearing his life story. It's so, so charming. Speaker 3 (1:14) It's a charming story. It's a classic New York kid story. If most New York kids went off to Greece for a few years and had a donkey and some pets. And yeah, no, he's got some great stories and he's just a lot of fun to talk to. Speaker 2 (1:33) Yeah, I love that you guys kind of bonded over that because you both had sort of the classic Upper East Side memories. This might have gotten cut from the final episode, but you're talking about the doorman at Christie's or something like that. It was very inside baseball on the Upper East Side, but a lot of good takeaways too. I mean, I think Alex Papakostidis is such a cool character because he really is from the old school, calls himself a decorator, that generation, that kind of designer or just decorator. But he also sort of embraced the new world. Like he has a big Instagram following. He loves it. social media he's got his own tabletop line so he really sort of bridges that old and new and he You know, there was something he said at the beginning of the show is I'm the fanciest casual person you'll ever meet or maybe the most casual fancy person you'll ever meet. So he contains multitudes and it was a great chat. He Speaker 3 (2:18) does. And he's got a great energy and he actually talks about some of the things that we're going to get into in the show later in terms of supporting his vendors and really being there and developing long term partnerships. And and there's a lot to learn from an old school, as he describes himself, decoration. So I hope people enjoy it. And as you say, Alex Papakrasidis is a bit of a TV star these days. Between Homeworthy and his social media accounts, he's a lot of fun and you can see why. Okay, we're going to take a quick break and then we'll get into the news. Speaker 3 (2:57) This podcast is sponsored by June Lalloy. The Total Home Brand just launched their second collaboration with renowned interior designer Heidi Callier. Complete with rugs and pillows that capture Heidi's signature style. The designs lend themselves to feeling cozy and lived in, featuring nostalgic motifs, warm, muted colors, and patterns that are meant to be layered. Explore the entire collection and get the Heidi Callier look. Speaker 3 (3:28) That's J-O-O-N-L-O-L-O-I dot com. Speaker 3 (3:34) This podcast is sponsored by Lutron. Lutron's premium lighting solutions allow designers to control light like never before. Create beautiful, bespoke lighting experiences for your clients with Lutron's unrivaled light fixtures, motorized window treatments, and custom engraved controls. Visit Lutron.com slash luxury to get inspired today. Speaker 2 (4:06) And we're back. First up, Fred, we're Speaker 3 (4:08) going Speaker 2 (4:08) to check in on our neighbors to the north, Canada. Uh-oh, the Novocaine's wearing off. Hours before a 50 % tariff was scheduled to kick in, President Trump announced a pause on the new duty. We talked about... this was maybe probably likely not going to happen and surprise it did it did not happen uh you know just to sort of briefly recap there was this big 50 tariff that was going to get lowered on on canada midnights tuesday that was yesterday as per our recording you know it was obviously a shock in as much as any big tariff announcement is a shock these days but there was a lot of speculation that this was just part of a negotiation kind of a cudgel used to get canada to the table to you know make a series of concessions and we don't know exactly what the deal is, but it seems like they're working on it. Seems like progress is being made. Tomorrow, Friday, there's going to be more news, but it seems like that big 50 % Canadian tariff is probably not going to come true. Speaker 3 (5:02) Hopefully that's the case. The taco trade strikes again. I hope that Canada will forgive us, and I hope that this... Agreement means that we'll see plenty of Canadians at high point this market. I felt like they were a little light last time around because of how they were feeling. And hopefully this will smooth things over. Let's move on and talk about the renovation twins, Speaker 2 (5:25) shall we? My favorite twins. Over the past week, Home Depot and Lowe's have both reported earnings. Lowe's actually reported earnings just this morning. The news is in. The news is in. Shall we start with Home Depot? Yeah, let's start with the bigger twin here. Speaker 2 (5:40) once again, we have to pause. Home Depot sales in the quarter were $47.9 billion. Take that in. Exactly. An enormous company. And like the year over year increase was $2.6 billion. And they frame that as, oh, you know, it's a moderate increase. So I don't know. You know, if you look at the rest of the numbers, comp sales increased 1.3%. They basically stuck to their 2026 outlook saying like, we predicted the year was going to go this way. We're basically not any more optimistic or pessimistic than. we were at the beginning of the year. Interestingly, they got a $730 million tariff refund, which is quite a lot of money, but sort of a drop in the bucket for Home Depot. And, you know, this was sort of a they didn't seem too excited about this on the earnings call. This is, you know, in their words, the housing market is still frozen. They're just sort of chugging along. What do you make of this? Speaker 3 (6:30) As you say, everything is chugging along. This is an. incredibly well-run company. Both of these companies are, man, they are working hard just to eke out a 1.3 % comp sales increase. I mean, they are really working overtime and they make it very clear that there is little to get excited about here and they are hoping for brighter days in the future. Speaker 2 (6:54) Yeah, indeed, Lowe's. Pretty similar quarter. Their sales were $26 billion, which is a lot, but less than Home Depot. A little bit up over last year. Similar comp sales bumped up a tiny bit too. Lowe's seemed a little bit more pessimistic, though. Their call had a little bit more of a negative energy. They didn't exactly lower their guidance for the rest of the year, but they said, we're going to fall on the lower end of the range that we had earlier predicted. So even though they're chugging along, they don't seem super excited about the rest of the year. I think that all comes down to housing. You know, we look at these two companies because they're a bellwether for the broader housing market, which, of course, affects designers and fabric companies and furniture companies. And there was nothing terribly optimistic about the housing market in either one of these earnings calls. Speaker 3 (7:39) Absolutely. And Lowe's is catering much more to a DIY customer. Home Depot has very wisely over the years made some pretty sizable acquisitions to get into the. pro and contractor side of the business. So that side of the business is stronger. That is certainly helping them out right now. The fantasy that we had about everyone taking these HELOC or these home equity loans out on all the home equity that we know they have and renovating, that doesn't seem to be playing out. And I think part of the reason is just rates have stayed as high as they are. And if anything, rates seem to be going higher. So again, the winds just aren't blowing in the right direction for housing. In fact, housing is getting even worse as we Speaker 2 (8:24) speak, Fred. As we speak. That's rough. Over the past 15 minutes, it's gotten worse. Yeah. I don't know. You know, the 30-year fixed rate mortgage is now 6.67%, something like that. We've talked. that people are going to get optimistic when that first number is a five. It's going away from that. So, you know, more gridlock on housing. I mean, again, these companies are still making money. People are doing things. They're buying appliances. There are renovation projects. People are coming in and out the door. It's not like bad news bears necessarily, but it's just more stagnation from the renovation twins. Speaker 3 (8:58) No, no, no. It's clear. Listen. Parts of the economy are booming, to be sure, but the housing market is not the part of the economy that is doing well at the moment. And these two drive that home. So let's move on and see if we can make back to school more upbeat, shall we? This week, BOH's Haley Chouinard wrote about a University of Cincinnati program that places design students in firms across the country. Interesting program. Speaker 2 (9:23) Yeah, I love this very nice program. You know, we always talk on the show or you always talk rather with designers about how, you know, what are the design schools teaching them? Why don't they have practical skills? They arrive at my office. They don't know how to add up a number or get a fabric sample. You know, this program kind of puts the lie to that because, you know, they actually place their students in actual design firms, have the commercial residential. They help them, you know, get these opportunities. Students go out and work. They get paid. It's like a real job. And Haley profiled this one designer in Chicago who actually, you know, has a rotating cast of these, you know, students coming in and out of her firm. She uses them as design assistants. The arrangement works really well. So, you know, this is a, seems like a great program to me anyway. Speaker 3 (10:02) It seems like a win-win. Am I right? I mean, I think that the students want to have this practical hands-on education and exposure and also they get to make some money and perhaps pay some of those student loans off and they get to get a sense of, the industry that they're really pursuing and really get a taste of it, often in a completely different market than their own. Speaker 2 (10:26) Yeah. And that's what I loved about it, too, is that the student in Haley's article talked about how she thought she wanted to do commercial design, but then she figured out through this program that she actually wanted to do residential. And I think that's the kind of realization in a normal career you might make like five years later because you're stuck in some job that you don't like and you have to get out of it. Whereas if you're just sampling it as a student, it's a lot easier to shift and move. I do think one of the things that stuck out to me is that like, while this is a great program, it's not like the school covers your housing and doesn't buy you an airfare to the city where you're going to. So on some level, this, you know, does favor people who have the economic, you know, resources to move to a new city and, you know, put themselves up while they work for a designer. But. you know, that's always kind of been the case. And I think there's, this is a, this is a great program. Just to pivot more broadly to, you know, to back to school more generally, to bring it down, Dennis, because it's pretty optimistic for a second there. That is going Speaker 3 (11:17) to be the tone of the show. We definitely need to bring it down if we get excited. Speaker 2 (11:20) Well, I mean, I just I do think we're in kind of a weird moment for design schools in general. Now, there's a lot of struggles, maybe not specifically design schools, but with art schools like CCA in California, actually a school that I lived near to when I lived in California is closing, which is kind of a shock. It was such an institution. SVA, a school of visual arts here is sort of in crisis. There's all these layoffs at the new school. It feels like a lot of these design art oriented programs are just going through a really. difficult period right now. I don't know if you've noticed any of that as well. I was surprised by all the headlines popping up recently. Speaker 3 (11:53) Yeah, there's a... There are a lot of negative headwinds facing design schools and, as you say, particularly art schools. And at first we were brushing it off as, oh, maybe it's just the demographic shift and there just weren't as many people interested of a certain age in pursuing that field of education. But clearly some policy shifts in how we're treating student loans and, in fact, getting rid of some student loan programs and also what we're doing to perhaps discourage international students from coming over. the U.S., which is a big component in all of this. Speaker 2 (12:26) Yeah, both of those really matter a lot. I mean, I think on the international student point, I think if you're not in the system, you maybe don't perceive the degree to which a lot of these schools are populated by international students. And of course, international students typically pay full freight. So they fund a lot of these schools to keep going. And, you know, because a lot of political changes recently, I think international students are a little bit more hesitant about the status of their visa or, you know, making sure that they can be in the country. There's a lot of agita around that. And that is causing a lot of international students to pull back from these programs. which presents a real, you know, a real economic crisis for these schools, which have kind of quietly relied on them to, you know, to keep the lights on while, you know, domestic students maybe have loans or scholarships or don't end up paying as much money as foreign students do. So I don't know. That's been kind of an underreported but important angle to this. Speaker 3 (13:13) Couldn't agree more, Fred. And that's such an important point. And at the same time, as we've just been discussing, the federal loan programs are being reassessed with an eye towards how likely are these students going to be able to repay these loans in a reasonable period of time based on what the predicted salaries might be in the first five to 10 years that these students come out of school. Always hard to know, but certainly underneath that is sort of a suggestion that who's really deciding who gets loans and who doesn't and who gets to pursue the kind of career that they want to. Speaker 2 (13:50) Yeah, it's really complicated, right? Because you sort of understand the impulse to protect people from getting loans. getting taken in by a predatory loan or attending a university that's going to end them in a career cul-de-sac. That all seems well taken, but sort of the spirit of all these changes feels almost like anti-intellectual, anti-higher education. And it is really too bad. I do think that most students going to a top design school aren't necessarily relying entirely