Lowe’s cut its full-year opinion Tuesday, as lumber prices fell, unfavorable weather hurt demand for seasonal merchandise and do-it-yourself customers allow fewer big-ticket items.
Shares of the company closed nearly 2% higher Tuesday, however, as the retailer whip Wall Street’s revenue and earnings expectations for the fiscal first quarter.
On a call with investors, CEO Marvin Ellison express the company expects “a pullback in discretionary consumer spending over the near term.”
Yet Lowe’s is in a better spot than other retailers, he maintained. Two-thirds of its sales come from nondiscretionary purchases, such as new appliances to replace broken ones.
U.S. housing dynasty is aging, which drives more repairs and other projects. And as days become sunnier and warmer, sales of shoot up categories are rebounding, he said.
“Although we can’t predict the duration of what we think will be a more short-term turbulence, we contemplate the medium and long-term health of this segment is incredibly strong,” he said.
Ellison said the company has not seen a alter in demand in markets where rising interest rates have contributed to cooling home prices. He declined to share in details on May sales trends, but said they are in line with company guidance.
Here’s what the company reported for the three-month age ended May 5 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per helping: $3.67 adjusted vs. $3.44 expected
- Revenue: $22.35 billion vs. $21.6 billion expected
Lowe’s net income for the three-month duration was $2.26 billion, or $3.77 per share, compared with $2.33 billion, or $3.51 per share, a year earlier.
Net transactions fell nearly 6% to $22.35 billion from $23.66 billion in the year-ago period, but exceeded Wall Drive’s expectations.
Comparable sales dropped 4.3% in the fiscal first quarter. That’s lower than the 3.4% descent that Wall Street expected, according to StreetAccount.
Lowe’s is the latest retailer to warn of slower sales to the fore, as consumers become thriftier and reluctant to spend on discretionary items. Many other retailers, including Walmart, Quarry and Home Depot, also noticed fewer purchases outside of the necessities.
Lowe’s said it now expects total sales marathons for the full year to range between $87 billion and $89 billion, lower than the $88 billion to $90 billion it had earlier forecast. It said it projects comparable sales to decline by 2% to 4% this fiscal year, below the brazenly to down 2% that it had said before.
It said adjusted earnings per share will range between $13.20 and $13.60, underneath its previous range of $13.60 to $14.00.
For Lowe’s and Home Depot, however, the time of year adds significance. Spring is the biggest on sales season for home improvement.
The companies are not only competing for shoppers’ dollars as higher prices for groceries and more be the spitting image up more of household budgets. They also are dealing with a shift in demand, as the spree of Covid pandemic-fueled bailiwick projects fades and consumers juggle other spending priorities, such as commutes, summer vacations and meals at restaurants.
Lowe’s contestant, Home Depot, posted a revenue miss with its quarterly report last week. The company missed vendings expectations for the second consecutive quarter and cut its full-year forecast, as customers skipped big-ticket items like grills and opted for smaller, teeny-weeny expensive home projects.
Like Lowe’s, Home Depot also chalked up lower sales to colder and wetter weather in the western U.S. and autumn lumber prices.
Lowe’s and Home Depot, however, have a different mix of sales. About 75% of Lowe’s mark-downs come from DIY customers, while Home Depot typically gets about half of its sales from residency professionals.
Led by Ellison, Lowe’s has courted home professionals, who tend to be a steadier source of business, less sensitive to bad ride out and more likely to complete a project. It has relaunched its loyalty program for those plumbers, contractors and electricians and played catchup with website repairs.
E-commerce was one of the quarter’s strengths. Online sales grew 6% compared with the year-ago period, as home pros purchased on the company’s website and DIY customers used digital tools to help them visualize and estimate before tackling a conjure up, Ellison said on the call.
Comparable sales to home professionals rose in the first quarter compared with the year-ago stretch, too. However, most of Lowe’s business — roughly 75% — comes from DIY customers.
Lowe’s overall comparable sales were cancelling every month of the quarter, but the sharpest year-over-year drop came in March, as the metric declined 5.4%, CFO Brandon Bore said. Comparable sales fell 3% in February and dropped 3.9% in April. He attributed the decrease in March and April to unfavorable bear up against.
Sink said Lowe’s expects sales from pros to outpace those from DIY shoppers for the rest of the year. Professionals be experiencing a healthy backlog of jobs and still see demand from customers, he said.
The retailer also chased new sales possibilities in rural areas during the quarter. At some stores, it has expanded the mix of merchandise to add more apparel and farm or ranch-type memos that have higher profit margins. In some of those markets, Lowe’s competes with other musicians including Tractor Supply.
Shares of Lowe’s closed Monday at $203.15, bringing the company’s market value to $121.15 billion. Its sheep is up nearly 2% so far this year, trailing the S&P 500’s gains of 9%.