Lowe’s has revised its annual sales forecast downward as customer spending on do-it-yourself projects decreases, resulting in a nearly 13% drop in third-quarter sales. The company now expects a sales total of about $86 billion for the fiscal year, considerably lower than its previous outlook. CEO Marvin Ellison attributes the decline to a greater-than-expected pullback by customers on discretionary projects and big-ticket purchases, although sales to home professionals have risen. Despite these challenges, the company seeks to focus on providing value and convenience during the upcoming holiday season. Lowe’s third-quarter earnings per share of $3.06 slightly exceeded analysts’ expectations, but revenue fell short at $20.47 billion compared to the expected $20.89 billion. This reflects the broader trend in the home improvement industry, as both Lowe’s and its competitor Home Depot face cooling demand amidst a slowdown in Americans’ pandemic-driven home improvement frenzy and rising mortgage rates. On the bright side, Lowe’s net income for the fiscal third quarter saw a substantial increase from $154 million to $1.77 billion, driven in part by a $2.1 billion impairment charge. While Lowe’s stock has risen moderately this year, it lags behind the broader market performance. The company also faces stiff competition from Home Depot, which reported beating Wall Street’s fiscal third-quarter earnings and revenue expectations, despite a 3% drop in sales. Home Depot pointed out that while customers are still engaged in home improvement, they are increasingly tackling smaller and less costly projects. Meanwhile, Home Depot’s CFO expressed confidence in the waning inflationary pressure. In response to these challenges, Lowe’s stock performance has been relatively lackluster, closing at $204.44 on Monday, translating to a market value of nearly $118 billion.
Sales Outlook Revised Downward
Lowe’s has revised its full-year sales outlook, now anticipating sales of about $86 billion for the fiscal year, down from the previously expected range of $87 billion to $89 billion. The company also projects a 5% drop in comparable sales for the fiscal year, worse than the initially anticipated decline of 2% to 4%. Additionally, adjusted earnings per share are now expected to be about $13, below the previous range of $13.20 to $13.60.
Challenges in DIY Projects and Big-Ticket Purchases
Marvin Ellison, Lowe’s CEO, noted a ‘greater-than-expected pullback’ by customers on discretionary projects and big-ticket purchases, leading to a decline in sales. However, sales to home professionals, which account for 25% of the business, saw growth during the quarter. Despite the challenges, the company looks to focus on providing value and convenience during the upcoming holiday season.
Quarterly Performance
In the fiscal third quarter, Lowe’s reported earnings per share of $3.06, slightly exceeding analysts’ expectations, while the revenue of $20.47 billion fell short of the expected $20.89 billion.
Industry Trends and Competition with Home Depot
Lowe’s, like its rival Home Depot, is grappling with a slowdown in the demand for home improvement as the pandemic-driven fervor wanes and higher mortgage rates create uncertainty in the housing market. Despite this, Ellison emphasized the long-term potential of the home improvement market, citing limited housing stock and the aging average age of homes across the U.S. Lowe’s net income for the fiscal third quarter surged to $1.77 billion from $154 million in the year-ago period, partly due to a $2.1 billion impairment charge as the company exited the Canadian market. On the competitive front, Home Depot outperformed Wall Street’s expectations for the fiscal third quarter, despite a 3% sales decline. The company observed that customers are engaging in smaller and less costly projects, reflecting broader industry trends. Furthermore, Home Depot’s CFO expressed optimism regarding the inflationary environment.
Stock Performance and Market Value
Lowe’s stock has seen a modest 3% increase this year, lagging behind the approximately 18% gains of the S&P 500. The company’s stock closed at $204.44 on Monday, translating to a market value of nearly $118 billion.