Home may be where the heart is, but homeowners aren’t showing theirs much love lately, judging by the forlorn looks in the eyes of home-supply companies. 

In its quarterly earnings call on Tuesday, Lowe’s reported falling revenue as homeowners spend less on their homes — an outcome in line with results reported last week by rival Home Depot. Amid a still-stagnant housing market, the two companies’ fortunes reflect America’s continued aversion to big-ticket spending.

High Point, Lowe Point

The housing market remains entirely stuck in the mud. While home sales increased about 3% in January versus the prior month, the bump should be taken with a grain of salt. After the white-hot pandemic years, sales of existing homes in 2023 plummeted by nearly 20% to around 4 million, the lowest full-year level since 1995. New home sales increased slightly in January, too, but similarly remain far below the pandemic’s home-buying blitz. Nobody is looking forward to the (presumably) eventual interest-rate cuts more than your local real estate agent.

Nobody, that is, except for big-box home goods retailers like Home Depot and Lowe’s. Just as Americans aren’t buying new homes, they aren’t pouring money into upgrading their current homes either:

• Lowe’s, which still beat analysts’ Q4 expectations, noted that the downturn in the housing sector has hurt its important DIY unit, as well as hitting sales of major appliances. The company said revenue fell 17.1% from a year earlier.
• Home Depot similarly beat analyst expectations by a narrow margin, but sales were still off 3% from a year ago. The company also reported softness among big-ticket product categories, though it does plan to open 12 new store locations this year.

“When [interest and mortgage] rates come down, that’s going to spur housing turnover and you know what happens when you put the house on the market: You spruce up the paint. You may spruce up the yard. You’ll do different projects around the house to get ready for sale and then when you buy a home, you do the same thing,” Lowe’s CEO Marvin Ellison said in an interview with CNBC.

Confidence Check: It’s not just the housing and home-adjacent markets feeling the squeeze, either. For the first time in four months, the consumer confidence index slipped in February, according to the Conference Board’s most recent monthly survey released on Tuesday. Meanwhile, speaking at an industry conference hosted by UBS on Tuesday, Goldman Sachs CEO David Solomon warned investors that a recession is still possible in the next year. Call it hard truths about a soft landing.

Apple likes to keep developing products under lock and key, but some investors want the company to bust a hole in the vault and share what it’s thinking about that crazy little thing called generative AI.

Two major Apple investors, Norges Bank Investment Management and LGIM, said they’re backing a proposal at the company’s annual shareholder meeting on Tuesday to force it to disclose more information about risks associated with its AI endeavors. Apple is telling shareholders to reject the motion, saying it would lay bare its highly guarded strategy, per the Financial Times.

The Not-So-Secret Walled Garden

Apple hasn’t pitched into the generative AI boom with the same extroverted fervor as its Silicon Valley peers, but that might change after a Bloomberg report on Tuesday that it’s ditching plans to build an electric car to focus more on generative AI projects. Just what those might be is anyone’s guess. Rival Google has already started touting AI features embedded in its messaging system for Android phones. If Apple wants to hold onto that blue text-bubble caché, it needs to exit stealth mode soon.

Apple’s investors have generally gone along with the company being as mysterious as possible about product launches as part of its secret sauce — but when it comes to AI, that approach just makes people anxious:

• LGIM said in a blog post that the shareholder proposition, called Resolution 7, mandates that Apple produce a “transparency report on the company’s use of AI in its business operations” as well as “disclose any ethical guidelines that the company has adopted regarding the company’s use of AI technology.”
• LGIM didn’t give any specific examples of AI-associated risks, but said that “data privacy and security, regulatory compliance and workforce transitions” were top of mind, and added that it sees “societal trust in AI as a material risk.”

LGIM added that it brought the issue to Apple directly, but the company hadn’t committed to any kind of increased transparency. “Apple is among several companies that have outsized influence on the integration of AI into our economy,” LGIM wrote.

Overflowing Glass Half-Full: Integration into our economy might mean figuring out how to make money off the technology. Last year, investors gleefully poured billions into generative AI, but this year could see a major crunch as the tech doesn’t hold tons of promise for near-term return on investment, as reported by The Verge last week. “We’ve gotten very frothy very quickly,” Bernstein analyst Mark Shmulik told the news outlet. It’s the ultimate optimism-vs.-pessimism showdown.

Macy’s flagship location in Herald Square takes up roughly an entire New York City block at more than 1 million square feet of retail space across multiple floors. And historically, most of its other locations have followed a similar pattern — lots of products in lots of space. 

There’ll be a lot less space now. 

The 165-year-old department chain plans to close 150 locations in the next three years. It’s the latest move from a legacy physical retailer as the industry navigates rapidly changing consumer habits.

Rightsizing

Macy’s is saying its move is more strategic restructuring than strictly cost cuts:   

• The 150 “underperforming” Macy’s locations represent 30% of the company’s footprint, but less than 10% of its sales. The plan is to shutter them and use the savings to open smaller versions of the titular store as well as launch more upscale Bloomingdale’s and BlueMercury cosmetics locations.
• Macy’s first announced its dive into expanding new stores one-fifth the size of their traditional locations last fall. Smaller stores mean cheaper rent, fewer employees, and less inventory. But smaller stores can better cater to certain demographics, increase foot traffic, and provide more time for store reps to interact with shoppers. 

Macy’s new CEO Tony Spring told The Wall Street Journal that surveys showed shoppers want less clutter and more sales reps. “This isn’t just about shrinking,” he said. “This is about resizing the portfolio to make sure we are giving people an opportunity to shop the way they want.”

Proxy War Never Changes: Macy’s is also battling activist investors Arkhouse Management and Brigade Capital Management, which offered to buy the company for $5.8 billion and take it private. Macy’s didn’t like the valuation or the financing and rejected the deal. Arkhouse responded by nominating nine candidates to Macy’s 14-member board. With revenue, digital sales, and same-store sales falling year-over-year in the fourth quarter, Macy’s has a tough fight to keep Arkhouse out.