Lowe’s recently announced a cut in its full-year forecast, citing a decline in quarterly sales and anticipating weakened spending on DIY projects. The company revised its total sales projection to be between $82.7 billion to $83.2 billion, down from the previous expectation of $84 billion to $85 billion. Comparable sales are now expected to decrease by 3.5% to 4%, compared to the initial forecast of a 2% to 3% decline. Adjusted earnings per share are projected to be approximately $11.70 to $11.90, lowered from the previous range of $12 to $12.30. This adjustment was attributed to “lower-than-expected DIY sales and a pressured macroeconomic environment.”
Quarterly Performance
In the fiscal second quarter, Lowe’s reported earnings per share of $4.10, surpassing Wall Street expectations of $3.97. However, the company’s revenue fell short, coming in at $23.59 billion versus the anticipated $23.91 billion. Net income for the quarter decreased to $2.38 billion, or $4.17 per share, compared to $2.67 billion, or $4.56 per share, in the same period last year. The company benefited from a $43 million pre-tax gain from the sale of its Canadian retail business in 2022, which boosted earnings per share by 7 cents. Excluding this gain, Lowe’s earnings per share stood at $4.10. Net sales also declined from the prior year, marking the sixth consecutive quarter of year-over-year sales decrease.
Reasons Behind the Decline
Lowe’s attributed the drop in comparable sales to customers taking on fewer discretionary home projects and unfavorable weather conditions impacting sales of outdoor and seasonal items. The company’s rival, Home Depot, outperformed Wall Street’s expectations for earnings and revenue in the same period. Despite this, Home Depot anticipates a weaker second half of the year due to customers delaying projects amidst higher interest rates and economic uncertainty. Home Depot’s CFO, Richard McPhail, highlighted that customers, despite benefiting from property value gains, are hesitant to invest in home improvement projects. This cautious consumer behavior is reflected in Lowe’s stock performance, which has lagged behind the S&P 500, with shares closing at $243.21.
As Lowe’s navigates through a challenging retail landscape, impacted by shifting consumer behavior and economic conditions, the company faces the task of realigning its strategies to drive growth and enhance profitability. The need to adapt to evolving market dynamics and cater to changing customer preferences will be crucial for Lowe’s to regain momentum and secure its position in the competitive home improvement industry.