Home Depot and Lowe’s, the do-it-yourself doppelgangers, have been among the best-performing companies during not only the pandemic home boom, but also the industry’s subsequent bust. So when they both report another quarter of lackluster financial results and—more importantly—say things aren’t going to get better anytime soon, it puts the entire home retail business into perspective.

The earnings calls were also a clear indicator that what the Federal Reserve does to interest rates will have a profound effect on what happens next for the home improvement twins (and just about everyone else in the home industry).

First, the numbers. Home Depot, which reported its second-quarter results last week, registered a tiny 0.6 percent gain in sales (to $43.2 billion) compared to this period last year. That boost came from its acquisition of building products supplier SRS Distribution earlier this year. Comp sales, without SRS, were off 3.3 percent globally and 3.6 percent in Home Depot’s U.S. stores. Earnings were flat.

At Lowe’s, which reported its Q2 earnings earlier this week, comp sales were off 5.1 percent, with total sales down a little more (5.6 percent), to $23.6 billion. Net income fell to $2.4 billion from $2.7 billion a year ago.

As weak as the numbers were, it was their shared pessimism for the future that raised a red flag. Both lowered their forecasts for the fiscal year and said that while they still believe long-term prospects were good, the short-term conditions looked pretty poor.

Lowe’s CEO Marvin Ellison was especially vocal: “We’re all aware that we have an environment of elevated interest rates and inflation, and because of that, the DIY customer is just on the sidelines waiting for some form of an inflection to take place,” he said on the company’s earnings call. Later on, he told CNBC’s Daily Open that “big-ticket purchases are being delayed as customers sit back and wait for interest rates to fall.”

Home Depot chief financial officer Richard McPhail characterized the economic climate to CNBC as a “deferral mindset” among consumers since the middle of 2023, indicating interest rates have caused them to put off buying and selling homes and borrowing money for bigger projects like kitchen renovations. Notably, McPhail didn’t see a much rosier outlook for the company’s business with pro contractors, noting that the category—normally a strength—was also starting to stall. “What our customers tell their pros is, ‘Everything I read tells me interest rates will be lower in three to six months. Why would I borrow to finance the project now rather than just wait a few months?’”

At its most recent meeting, in late July, the Fed indicated it was leaning toward a rate cut in September. Speculation is now centered around whether it will be by a quarter point, or less likely, a half point. Whichever it is, for Home Depot and Lowe’s, any cut is good news.

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Warren Shoulberg is the former editor in chief for several leading B2B publications. He has been a guest lecturer at the Columbia University Graduate School of Business; received honors from the International Furnishings and Design Association and the Fashion Institute of Technology; and been cited by The Wall Street Journal, The New York Times, The Washington Post, CNN and other media as a leading industry expert. His Retail Watch columns offer deep industry insights on major markets and product categories.