Lowe’s topped Wall Street’s quarterly earnings and revenue expectations on Tuesday, even as do-it-yourself customers bought fewer pricey items.
The home improvement retailer’s results echoed those of Home Depot last week. Home Depot missed revenue expectations, which it attributed to a tougher housing market and a delayed start to spring.
Lowe’s stuck by its full-year forecast. It said it expects total sales of between $84 billion and $85 billion, which would be a drop from $86.38 billion in fiscal 2023. It anticipates comparable sales will decline between 2% and 3% compared with the prior year, and expects earnings per share of approximately $12 to $12.30.
In an interview with CNBC, Marvin Ellison said a mix of factors have kept consumers from spending more freely, including pressure from inflation and uncertainty around when the Federal Reserve may cut interest rates.
“Interest rates can go down, but you still need consumer confidence come up,” he said.
He said Lowe’s held off on raising its full-year outlook as it awaits some of its biggest sales days. Spring is the holiday season for home improvement.
Here’s what the company reported for the fiscal first quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
Earnings per share: $3.06 vs. $2.94 expected
Revenue: $21.36 billion vs. $21.12 billion expected
In the three-month period that ended May 3, Lowe’s net income fell to $1.76 billion, or $3.06 per share, compared with $2.26 billion, or $3.77 per share, a year earlier.
Sales dropped from $22.35 billion in the year-ago period. It marked the fifth quarter in a row that Lowe’s posted a year-over-year sales decline.
Shoppers visited Lowe’s stores and website less, as homeowners put off larger projects and bought fewer pricey items. Transactions dropped 3.1% and average ticket dropped 1% year over year, Ellison said.
He told CNBC that customers have been buying fewer discretionary items, such as outdoor grills and patio sets, and taking on fewer projects like kitchen remodels.
Compared with Home Depot, Lowe’s draws less of its business from painters, contractors and other home professionals who tend to provide steadier business even when do-it-yourself customers pull back. Roughly half of Home Depot’s sales come from pros compared with about 20% to 25% at Lowe’s.
Yet Lowe’s has been trying to win business from more of those pros. Gains with pros and online sales growth helped to partially offset a decline in do-it-yourself spending.
Comparable sales for the quarter decreased 6.2%. For pro customers, however, comparable sales were flat for the quarter.
Lowe’s is lapping a year-ago quarter when the company slashed its full-year outlook and posted a year-over-year sales decline. At the time, Ellison warned investors that the retailer expected “a pullback in discretionary consumer spending over the near term.”
For each of the three quarters since then, Lowe’s sales have also dropped from the year-ago periods.
Shares of Lowe’s closed Monday at $229.17, bringing the company’s market value to $131.13 billion. As of Monday’s close, the company’s stock is up nearly 3% this year, trailing the 11% gains of the S&P 500.
