Lowe’s Cos. said its sales will fall further this year as consumers continue to hold off from sprucing up their homes amid higher mortgage rates and a drop in new construction projects.

Inflation and a stagnant housing market have made DIY customers “hesitant to spend on big-ticket purchases for their homes,” Chief Executive Officer Marvin Ellison told analysts on a Tuesday earnings call. “Those that did engage in home improvement activities took on smaller, non-discretionary projects with a heightened focus on value,” he said. 

The spending shift hit demand for items for the kitchen and bathroom, as well as for flooring and appliances. Lowe’s is focused on rolling out its new DIY loyalty program to boost traffic and revenue in store and online, Ellison said. 

Comparable sales for the current fiscal year will be down between 2 per cent and 3 per cent, a slightly larger dip than analysts were expecting, the retailer said Tuesday. Lowe’s saw like-for-like sales fall 6.2 per cent for the fourth quarter, though analysts were expecting an even worse performance. Shares rose less than 1 per cent at the market open on Tuesday in New York. 

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The most recent U.S. housing data has shown some improvement in sales of new and existing homes, but still-high borrowing costs mean that residential real estate activity is muted compared with a year ago. 

While home sales aren’t a direct indicator of Lowe’s sales, new purchases often fuel demand for home construction projects. Home owners who take on improvement projects make up about 75 per cent of Lowe’s sales. 

In November, Lowe’s cut its full-year forecast, citing fewer purchases of big-ticket items and a slowdown in spending by DIY customers. 

Total sales for the fourth quarter fell to US$18.6 billion, from $22.4 billion for the same period in the prior year. Earnings per share were $1.77, better than expected for the quarter.