Lowe’s has revised its full-year forecast downward after reporting a decline in quarterly sales, citing concerns about weaker home improvement spending for the remainder of the year. The home improvement retailer now projects total sales for the year to be between $82.7 billion and $83.2 billion, down from the previously expected range of $84 billion to $85 billion. Additionally, Lowe’s anticipates comparable sales to decline by 3.5% to 4%, a steeper drop than the prior forecast of 2% to 3%. Adjusted earnings per share are expected to be between $11.70 and $11.90, down from the earlier projection of $12 to $12.30.
CEO Marvin Ellison attributed the lower forecast to consumer hesitancy amid high inflation and rising interest rates. He noted that many consumers are delaying significant home improvement projects as they await potential interest rate cuts from the Federal Reserve. Ellison highlighted that about 90% of Lowe’s customers are homeowners, most of whom have fixed 30-year mortgage rates below 4%. This has made them reluctant to take on new loans or mortgages for large-scale home projects at higher interest rates.
In its fiscal second-quarter results, Lowe’s reported earnings per share of $4.10, slightly exceeding Wall Street expectations of $3.97. However, the company’s revenue came in below expectations at $23.59 billion, compared to the anticipated $23.91 billion. Lowe’s net income for the quarter fell to $2.38 billion, or $4.17 per share, from $2.67 billion, or $4.56 per share, in the same period last year. The company benefited from a $43 million pretax gain from the sale of its Canadian retail business, which boosted earnings per share by 7 cents. Excluding this gain, the adjusted earnings per share were $4.10.
Lowe’s saw its net sales drop from $24.96 billion in the prior year, marking the sixth consecutive quarter of year-over-year sales declines. Comparable sales fell by 5.1%, as consumers scaled back on discretionary home projects and unfavorable weather impacted the sales of outdoor and seasonal items. However, these declines were partially offset by growth in Lowe’s online business and sales to home professionals, such as contractors and electricians. Sales to pros rose by mid-single digits, while online sales increased by 2.9%.
Lowe’s has been focusing on attracting more home professionals, who account for about 25% of its sales, compared to around 50% at rival Home Depot. This effort has paid off, with pros now representing the strongest segment of Lowe’s business. Despite the challenges, Lowe’s stock has gained about 9% year to date, although it lags behind the nearly 18% gains of the S&P 500.
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