An exterior view of a Lowe’s home improvement store. Lowe’s Companies, Inc. reports quarterly earnings on Tuesday, May 23, 2023.
Paul Weaver | Lightrocket | Getty Images
Lowe’s on Tuesday lowered its full-year sales outlook, after customers spent less on do-it-yourself projects and caused its fiscal third-quarter sales to tumble nearly 13% year over year.
Shares of the company fell about 3% on Tuesday.
The home improvement retailer said it now anticipates sales will total about $86 billion for the fiscal year. It had previously expected a range of $87 billion to $89 billion. It projects comparable sales will drop by about 5% this fiscal year, worse than a previously anticipated a decline of between 2% and 4%. The company expects adjusted earnings per share to be about $13, lower than its previously expected range of $13.20 to $13.60.
On a call with investors, CEO Marvin Ellison said Lowe’s felt a “greater-than-expected pullback” by customers on discretionary projects and big-ticket purchases.
“While we’ve seen a more cautious consumer for some time now, this quarter we saw some of these consumers increasingly prioritizing experiences over goods spending on travel and entertainment,” he said.
Yet he said its sales to home professionals, which are accounting for a growing share of its revenue, rose in the quarter. Those pros drive about 25% of its business. He said the company, which sells Christmas trees and decorations, will focus on offering value and saving customers’ time during the holiday season.
Here’s how Lowe’s did for the fiscal third quarter ended Nov. 3:
Earnings per share: $3.06, it was not immediately clear if it was comparable to the $3.03 analysts expected, according to consensus estimates from LSEG, formerly known as RefinitivRevenue: $20.47 billion vs. $20.89 billion expected
Lowe’s, like its larger rival Home Depot, faces cooling demand as Americans’ huge, Covid pandemic-fueled appetite for home improvement moderates and higher mortgage rates inject more uncertainty into the housing market.
Ellison warned on an earnings call in August that a pullback in spending on DIY projects would be “the overall theme of how we see the second half of the year.” But he stressed that long term, the home improvement market had bright prospects because of limited housing stock and older average age of homes across the U.S.
In the fiscal third quarter, Lowe’s net income was $1.77 billion, or $3.06 per share, compared with $154 million, or 25 cents per share in the year-ago period. That quarter included a $2.1 billion impairment charge as the company sold its Canadian business.
Net sales fell from $23.48 billion a year earlier.
Customers are postponing or scaling back appliance purchases if they can, Ellison said on an earnings call with investors on Tuesday. For example, he said some shoppers are buying just a refrigerator instead of an entirely new suite of kitchen appliances.
For Lowe’s, that pullback is noticeable, since it is the top seller of appliances in the U.S. and draws 14% of its sales from the category, he said.
Online sales declined 4% in the quarter, as pressures on discretionary spending showed up there, too.
Ellison said the company is stepping up its merchandising and marketing to emphasize value to price-sensitive shoppers. He said customers have also responded well to its outlet stores, which sell discounted big and bulky items like patio furniture or appliances that have been scratched or dented. It opened its 15th outlet location during the third quarter.
Lowe’s competitor, Home Depot, beat Wall Street’s fiscal third-quarter earnings and revenue expectations last week, even as its sales fell 3% year over year. Home Depot said customers are still fixing up their homes, but noticed for the past several quarters that more of them are taking on smaller and less pricey projects.
Home Depot Chief Financial Officer Richard McPhail also said “the worst of the inflationary environment is behind us.”
As of Tuesday’s close, shares of Lowe’s have fallen about 1% so far this year, trailing the approximately 18% gains of the S&P 500. The company’s stock closed Tuesday at $198.06, bringing Lowe’s market value to $114.3 billion.
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