A research report from Guotai Haitong Securities Co., Ltd. highlights a discernible deceleration in the export sector's growth momentum during the second quarter, based on an analysis of listed companies' financial results. The findings reveal a notable divergence in performance, with channel partners outpacing brand owners, and mass-market retail showing greater resilience compared to the home improvement and building materials segment. The firm recommends focusing on companies that possess precise niche market positioning, accumulated expertise in process cost control, and the capability to execute differentiated product and channel operations.

According to the financial reports, the sector's growth rate slowed in Q2, yet channel operators continued to outperform their brand counterparts, with inventory-to-sales ratios remaining at historical lows. During the quarter, U.S. home improvement channel operators and general merchandise retailers sustained revenue growth in the mid-to-high single digits, although this represented a slight moderation compared to the first quarter. Brand owners, however, exhibited notably weaker results. For instance, SomniGroup and La-Z-Boy transitioned to negative revenue growth on a year-over-year basis, while SWK managed to hold revenues flat, albeit with a growth rate that also cooled from Q1. From an inventory perspective, the trend remains downward, as all eight surveyed listed companies maintain inventory-to-sales ratios below the 20th percentile of their five-year historical range, reflecting a continued cautious approach to inventory management.

Examining company operational reviews, several key industry characteristics emerged in Q2. Firstly, the housing market remains effectively 'frozen' due to the prevailing interest rate environment. Home Depot explicitly cited a 'frozen' housing market, noting that the home turnover rate has stayed at historical lows for four consecutive years, with 30-year mortgage rates around 6.7%, directly suppressing demand for large-scale home improvement projects. Similarly, Lowe's and La-Z-Boy pointed to persistent weakness in residential construction and housing activity. Secondly, consumer spending patterns are clearly diverging. Walmart's U.S. same-store sales grew 2.6%, its weakest performance in six years, but this was offset by strength in e-commerce (up 24%), membership (up 17%), and advertising segments. Target fared better with 3.8% same-store sales growth, driven by foot traffic. While high-end consumer spending shows softness, Wayfair's premium platform Perigold reported standout growth.

Thirdly, tariff refunds have emerged as a widespread benefit, though they also intensify price competition. At least five of the eight companies surveyed, including HD, LOW, WMT, TGT, and SWK, received IEEPA tariff refunds, with amounts reaching up to several billion dollars. Most of these companies have chosen to reinvest these refunds into price reductions to bolster their competitive positioning and market share. Fourthly, the bedding industry remains in a phase of deep adjustment. SomniGroup has revised its global bedding industry outlook from 'flat to slightly down' to a 'mid-single-digit decline', with actual U.S. Q2 results showing a mid-to-high single-digit decrease. Industry consolidation is evident as larger retailers continue to capture share from smaller players. Fifthly, the power tool segment is demonstrating robust momentum in the Pro channel. Stanley Black & Decker reported an 8% organic revenue increase in power tools, its fastest growth in recent years, with U.S. commercial and industrial channels achieving low-double-digit growth and the DEWALT brand gaining share in the Pro segment. However, outdoor products remain under pressure, declining 7%.

Regarding the latest changes in forward-looking guidance, the trends are mixed. In the mass retail segment, guidance has been revised upward. Walmart raised its net sales forecast from 3.5%–4.5% to 4%–5%, Target increased its outlook from approximately +4% to about +5%, and Wayfair lifted its quarterly guidance from mid-single-digit to high-single-digit growth. These adjustments are supported by healthy traffic and market share dynamics, with tariff refunds being reinvested in price cuts and growth initiatives to further strengthen their positions. Conversely, the home improvement sector remains cautious. Home Depot maintained its guidance for the third consecutive time, choosing not to raise its outlook despite a Q2 earnings beat, relying on its Pro ecosystem and market share gains to offset industry headwinds. Lowe's has explicitly acknowledged pressure in DIY and residential construction, lowering its guidance to the bottom of its range. Meanwhile, the durable goods chain faces broader challenges: SGI has downgraded its outlook due to a weaker mattress industry, La-Z-Boy has revised its growth trajectory downward after missing guidance in Q1 amid soft furniture demand, and SWK has kept its revenue outlook but noted that its market assumptions of 'roughly flat to slightly down' have turned more pessimistic compared to February.