Lowe’s Beats Estimates, But Investors Focus on Sluggish Sales Growth
Despite posting better-than-expected results, Lowe’s shares took a hit in premarket trading as investors zeroed in on the home improvement retailer’s ongoing struggle with negative sales growth.
Strong Online Sales and Pro Business Offset Softness
Lowe’s reported revenue of $20.17 billion, surpassing estimates of $19.93 billion, while adjusted earnings per share came in at $2.89, beating expectations of $2.82. According to CEO Marvin Ellison, the company’s modestly better-than-expected results were driven by high-single-digit positive comps in Pro, strong online sales, and smaller-ticket outdoor DIY projects.
Same-Store Sales Continue to Decline
However, same-store sales slipped 1.1%, although less than the anticipated 2.7% decline. The company attributed this softness to “DIY bigger-ticker discretionary demand,” which was partially offset by hurricane-related recovery efforts and positive same-store sales in its Pro business and online.
Guidance and Outlook
Lowe’s expects to end the year with total net sales in the range of $83.0 to $83.5 billion, slightly higher than previously expected. Same-store sales growth is anticipated to decline 3.0% to 3.5% year-over-year, an improvement from the previously expected decline of 3.5% to 4.0%. The company plans to discuss new growth and productivity initiatives at its Analyst and Investor Conference in December.
Positive Catalysts Ahead
Analysts point to several positive catalysts on the horizon, including Fed rate cuts, hurricane-related recovery efforts, and normalizing post-pandemic demand trends. Lower interest rates are expected to spur increased consumer spending in the coming months, historically benefiting the home improvement sector.
Rival Home Depot Posts Strong Results
Last week, Home Depot reported results that beat estimates across all key metrics, with revenue jumping 6.6% year over year to $40.22 billion. Adjusted earnings per share came in at $3.78, versus estimates of $3.66. Same-store sales dropped 1.30%, less than the estimated 3.01% decline.
Analysts Weigh In
Bank of America analyst Robby Ohmes believes Lowe’s is gaining traction with its Total Home Strategy, which includes improved service, investment in inventory depth, store remodels, and online & digital tools. TD Cowen analyst Max Rakhlenko expects growth within the Pro business, specifically the small to medium-size Pro market. DIY customers currently make up roughly 75% of Lowe’s business.
Year-to-Date Performance
Shares of Lowe’s are up 24% year to date, roughly in line with the S&P 500’s gain. Rival Home Depot has seen a 19% increase in 2024.
Leave a Reply