Lowe’s cut its full-year outlook Tuesday, as lumber prices fell and do-it-yourself customers bought fewer items.
The house improvement retailer lowered its forecast whilst it beat Wall Street’s revenue and earnings expectations for the fiscal first quarter.
Shares of the corporate were down roughly 1% in early trading.
On a call with investors, CEO Marvin Ellison said lumber deflation, unfavorable weather and lower spending by DIY customers hurt quarterly sales. He said the corporate expects “a pullback in discretionary consumer spending over the near term.”
Even so, he said the corporate is in a greater spot than other retailers. He noted two-thirds of its sales come from nondiscretionary purchases, comparable to recent appliances that replace broken ones or supplies for home repairs.
He added that “despite the macroeconomic environment with mixed-signals creating near-term pressures, we remain optimistic in regards to the way forward for home improvement.”
Here’s what the corporate reported for the three-month period ended May 5 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $3.67 adjusted vs. $3.44 expected
- Revenue: $22.35 billion vs. $21.6 billion expected
Lowe’s net income for the three-month period was $2.26 billion, or $3.77 per share, compared with $2.33 billion, or $3.51 per share, a 12 months earlier.
Net sales fell nearly 6% to $22.35 billion from $23.66 billion within the year-ago period, but exceeded Wall Street’s expectations.
Comparable sales dropped 4.3% within the fiscal first quarter. That is lower than the three.4% decline that Wall Street expected, based on StreetAccount.
Lowe’s is the most recent retailer to warn of slower sales ahead, as consumers turn into thriftier and reluctant to spend on big-ticket and discretionary items. Many other retailers, including Walmart, Goal and Home Depot, also noticed fewer purchases outside of the necessities.
The house improvement retailer said it now expects total sales for the total 12 months to range between $87 billion and $89 billion, lower than the $88 billion to $90 billion it had previously forecast. It said it projects comparable sales to say no by 2% to 4% this fiscal 12 months, below the flat to down 2% that it had said before.
It said adjusted earnings per share will range between $13.20 and $13.60, below its previous range of $13.60 to $14.00.
For Lowe’s and Home Depot, nevertheless, the time of 12 months adds significance. Spring is the most important sales season for home improvement.
The businesses are usually not only competing for shoppers’ dollars as higher prices for groceries and more take up more of household budgets. In addition they are coping with a shift in demand, because the spree of Covid pandemic-fueled home projects fades and consumers juggle other spending priorities, comparable to commutes, summer vacations and meals at restaurants.
Lowe’s competitor, Home Depot, posted a rare revenue miss with its quarterly report last week. The corporate missed sales expectations for the second consecutive quarter and cut its full-year forecast, as customers skipped big-ticket items like grills and opted for smaller, inexpensive home projects.
Like Lowe’s, Home Depot also chalked up lower sales to colder and wetter weather within the western U.S. and falling lumber prices.
For Lowe’s, e-commerce was one in all the quarter’s strengths. Online sales grew 6% compared with the year-ago period, as home professionals shopped on the corporate’s website and DIY customers used digital tools to assist them visualize and estimate before tackling a project, Ellison said on the decision.
Comparable sales to home professionals rose in the primary quarter compared with the year-ago period, too. Nevertheless, most of Lowe’s business — roughly 75% — comes from DIY customers.
That differs from Home Depot, which gets roughly half of its overall sales from home professionals, comparable to contractors and electricians.
Shares of Lowe’s closed Monday at $203.15, bringing the corporate’s market value to $121.15 billion. Its stock is up nearly 2% up to now this 12 months, trailing the S&P 500’s gains of 9%.
