The outlook for home improvement is structurally higher than in the past 

Our deep dive analysis of the outlook for the home improvement (HI) category concludes that several structural tailwinds should help it gracefully lap tough compares from '20. Our base case forecast assumes that category sales increase 1.5% in '21, followed by flattish trends in '22 due to lapping of stimulus (this will likely contribute 100-300bps to FY'21 growth). Importantly, to illustrate how conservative our '21 forecast is, it assumes MSD declines during the May-Dec period. This would imply 2-yr stacks of LDD during that period (vs. HSD in '18 & MSD in '19). Our model assumes that occupancy will continue to rise (it grew 2.5% in 2020 & we assume 1.5% growth for '21-'23). Plus, we expect that the % of HHs doing projects will increase 100 bps in '21 to 68%. Though, we assume that spend per project declines -1.5% (after growing 4.3% in '20). Importantly, we believe HD & LOW will continue to gain share, expanding their market leading positions. These factors should continue to help drive these stocks. 

Several structural factors should support the home improvement category 

The outlook for HI will be supported by: 1) Population migration to owning larger homes in suburbs. We est. the aggregate size of the housing stock will climb to 260b sft in ’23 vs. 240b in ’19. Further, owner occupancy should rise in part due to higher ownership among Millennials. A higher home ownership rate & a larger installed base of addressable footage should drive ~$10bn in incremental category spend per year (single family home owners spend $3,600 on avg vs. $1,800 for condo owners).; 2) More time spent at home which puts more wear & tear on properties and creates more time to do home improvement. Pre-Covid, 17% of workers were remote (vs. 44% during Covid). Plus, ~15% of the time saved from not commuting was directed towards HI projects; 3) The rising value of the housing stock should aid category spend. Home prices have had 90% correlation w. category spend (category sales growth represented 1% of total value of housing stock of ~$4 trillion in '20 vs. 1.2% LT avg).