An exterior view of a Lowe’s home improvement store. Lowe’s Companies, Inc. reports its quarterly earnings on Tuesday, May 23, 2023.
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Lowe’s on Tuesday lowered its full-year sales outlook after customers spending less on DIY projects caused its fiscal third-quarter sales to fall nearly 13% year over year.
The company’s shares fell almost 3% in early trading.
The home improvement retailer said it now anticipates sales will total about $86 billion for the fiscal year. He had previously expected a range of between $87 billion and $89 billion. He projects comparable sales will fall about 5% this fiscal year, worse than the previously expected decline of between 2% and 4%. The company expects adjusted earnings per share to be about $13, down from its previously expected range of $13.20 to $13.60.
In a call with investors, CEO Marvin Ellison said Lowe’s felt a “larger-than-expected pullback” from customers on discretionary projects and major purchases.
“While we have seen a more cautious consumer for some time, this quarter we saw some of these consumers increasingly prioritize experiences over spending on goods in travel and entertainment,” he said.
However, it said its sales to home professionals, which account for a growing portion of its revenue, rose in the quarter. Those professionals drive about 25% of your business. He said the company, which sells Christmas trees and decorations, will focus on providing value and saving customers time during the holiday season.
Here’s how Lowe’s fared during the fiscal third quarter ending Nov. 3:
- Earnings per share: $3.06, it was not immediately clear whether it was comparable to the $3.03 analysts were expecting, according to consensus estimates from LSEG, formerly known as Refinitiv.
- Revenue: $20.47 billion vs. $20.89 billion expected
Lowe’s, as its biggest rival House depositfaces cooling demand as Americans’ huge appetite for home improvements, fueled by the Covid pandemic, moderates and higher mortgage rates inject more uncertainty into the housing market.
Ellison warned in an earnings call in August that a pullback in spending on DIY projects would be “the overall theme of how we view the second half of the year.” But he emphasized that in the long term, the home improvement market had bright prospects due to limited housing stock and the older average age of homes across the United States.
In the fiscal third quarter, Lowe’s net income was $1.77 billion, or $3.06 per share, compared with $154 million, or 25 cents per share, in the same period a year earlier. That quarter included a $2.1 billion impairment charge when the company exited the Canadian market.
Net sales fell from $23.48 billion a year earlier.
Lowe’s competitor Home Depot beat Wall Street’s fiscal third-quarter profit and revenue expectations last week, even as its sales fell 3% year over year. Home Depot said customers are still fixing up their homes, but they’ve noticed in recent quarters that more of them are taking on smaller, less expensive projects.
Home Depot CFO Richard McPhail also said that “the worst of the inflationary environment is behind us.”
Lowe’s shares have risen about 3% so far this year, but have lagged the S&P 500’s gains of about 18%. The company’s shares closed Monday at $204.44, bringing Lowe’s market value to nearly $118 billion.
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