Lowe’s beat Wall Street’s quarterly earnings expectations on Tuesday, as outdoor do-it-yourself projects, the home professional business and stronger online shopping fueled sales.
Yet even with the better-than-expected results, the home improvement retailer is projecting a year-over-year sales decline. The company updated its full-year guidance on Tuesday, and now expects total sales of between $83 billion and $83.5 billion, higher than its previous forecast for $82.7 billion to $83.2 billion. It said it expects comparable sales to decline 3% to 3.5%, slightly better than the 3.5% to 4% drop that it had previously anticipated.
Lowe’s is lapping a year-ago period when the company lowered its outlook and sales tumbled nearly 13% year over year. It also cut its full-year forecast in August, as it predicted weak home improvement demand in the back half of the year because of high interest rates.
In an interview with CNBC, CEO Marvin Ellison said the retailer is “still feeling pressure in the home improvement market,” particularly on DIY projects like redoing a kitchen or bathroom. He said the company is still waiting for the housing market to pick up and for homeowners to tackle more projects again.
“We’re going to get to a new normal when it comes to [mortgage] rates,” he said. “And I think that we obviously have not gotten there yet.”
Yet in the meantime, Lowe’s has improved its online business, catered to more small- and medium-sized home professionals and spruced up its store showrooms, Ellison said.
Here’s what the company reported for the three-month period that ended Nov. 1 compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: $2.89 adjusted vs. $2.82 expected
- Revenue: $20.17 billion vs. $19.95 billion expected
Shares closed on Tuesday at $259.26, down nearly 5%
In the fiscal third quarter, Lowe’s net income fell to $1.7 billion, or $2.99 per share, compared with $1.77 billion, or $3.06 per share, in the year-ago period. Revenue dropped from $20.47 billion in the year-ago quarter.
Lowe’s adjusted earnings per share of $2.89 excluded gains associated with the company’s sale of its Canadian retail business in 2022.
Comparable sales declined 1.1% year over year, due to weaker demand for bigger and pricier discretionary DIY projects. That was offset, in part, by demand driven by preparation for and repairs from hurricanes Helene and Milton, along with growth in sales to home pros like contractors.
Adjusted operating income, adjusted operating margin, adjusted effective income tax rate and adjusted diluted EPS are non-GAAP financial measures that exclude the gains associated with the 2022 sale of the Canadian retail business, recorded in the second and third quarter.
Lowe’s competitor, Home Depot, reported last week that customers are still deferring bigger projects and pricier purchases, even after two interest rate cuts by the Federal Reserve. Home Depot beat Wall Street’s sales and earning expectations, yet posted its eighth quarter in a row of declining comparable sales. It did see some improving sales trends, however, due to hurricane-related demand, warm-weather home projects and the acquisition of SRS Distribution, a company that sells supplies to landscaping, pool and roofing professionals.
Ellison said Lowe’s has noticed those deferrals, too. But he added that “historically, the data tells us that these projects are not canceled, they’re just postponed.”
“We’ve not seen any real material, sustained movement, due to the decline in interest rates, but again, we know that it will come on the horizon,” he said. “It’s just a matter of time.”
As Home Depot focuses on attracting business from larger and more specialized home pros, Ellison said Lowe’s has zeroed in on winning more sales from small- and medium-sized pros. Sales in its pro business rose by high single-digits year over year, even as its comparable sales declined.
As of Tuesday’s close, shares of Lowe’s have risen about 17% this year. That’s less than the approximately 24% gains of the S&P 500 during the same period.