Evercore ISI lowered its ratings on two U.S. home-related retailers in a research note issued Friday after analyzing results from its annual home survey. Tractor Supply (NASDAQ: TSCO) was moved from Outperform to In Line, while Floor & Decor (NYSE: FND) was downgraded from In Line to Underperform.
The firm’s analyst, Greg Melich, said the survey results support positioning for a recovery that is concentrated in projects driven by professional contractors and by higher-income households through 2027, rather than expecting a broad-based rebound across all homeowners.
Key survey findings cited by Evercore include a decline in the share of households planning a home project in the next 12 months - 37% now versus 49% a year earlier - and an ongoing weakness in home sales activity, which the note describes as roughly one-third below normal.
Despite the lower incidence of planned projects, Evercore flagged several offsetting dynamics. Households that remain engaged in projects intend to spend more on average, and work carried out by professional contractors is proving more resilient as do-it-yourself activity softens.
Material cost expectations are also shaping the firm’s outlook: three in four survey respondents said they expect higher material prices. Melich interpreted this as evidence that sales growth in the sector is likely to come from greater spend per transaction rather than from an increase in the number of customer visits.
“Rates are not the main unlock for projects: Material costs, labor and competing priorities hold back deferred work far more than borrowing costs,” Melich wrote in the note.
Given these trends, Evercore said it prefers companies with stronger exposure to professional contractors and to higher-income customers. Within its coverage, the firm highlighted Home Depot (NYSE: HD) as a leader across those segments. Sherwin-Williams (NYSE: SHW) was noted for strengthening its position as the primary destination for paint professionals, while Lowe’s (NYSE: LOW) is described as having maintained its standing in the survey.
On the home furnishings front, Evercore said outcomes appear to rely more on selective stock choices than on the broader housing cycle. The firm pointed to retailers that appeal to movers and remodelers as well as to affluent buyers as examples of where demand may hold up, highlighting Wayfair and Williams-Sonoma for their ability to attract those customer cohorts.
Summary
Evercore downgraded Tractor Supply and Floor & Decor after a home survey showed fewer planned projects and a tilt toward contractor-led and higher-spend work. Material costs and labor are key constraints, and the firm favors retailers exposed to professional contractors and affluent households.
Key points
- Evercore moved Tractor Supply to In Line from Outperform and Floor & Decor to Underperform from In Line following its annual home survey.
- The survey found only 37% of households plan a project in the next 12 months, down from 49% a year earlier; home sales activity remains about one-third below normal.
- Evercore prefers exposure to professional contractors and higher-income customers - Home Depot and Sherwin-Williams are highlighted positively; Lowe's held steady in the survey.
Risks and uncertainties
- Persistently higher material costs - three in four respondents expect costs to rise, which could shift growth toward higher spending per transaction rather than more frequent visits (impacts building materials and retail sectors).
- Labor limitations and competing household priorities - these factors are cited as greater constraints on deferred work than borrowing costs, affecting renovation activity and related retail demand.
- Weak housing market activity - home sales remain about one-third below normal, which could continue to limit the volume of mover- and remodel-driven purchases (impacts housing, furniture, and home improvement retailers).