Lowe’s (LOW) executives spent Tuesday’s earnings call discussing the retailer’s struggles with lower discretionary spending from consumers, along with its efforts to expand its market share among professional contractors and improve its digital experience.
The comments came after Lowe’s second-quarter revenue came in lower than expected, leading the retailer to lower its full-year projections for sales and profits as inflation has led many consumers to hold off on larger home-improvement projects.
Lowe’s shares were less than 1% lower at $241.24 as of noon ET Tuesday.
Lower ‘Big Ticket’ DIY Spending
Lowe’s and home-improvement rival Home Depot (HD) have both cited a pullback in “big-ticket” spending over the last several quarters. Lowe’s Chief Executive Officer (CEO) Marvin Ellison said Tuesday that the company is facing a “challenging industry backdrop for the homeowner,” including high interest and mortgage rates slowing the housing market and inflation raising the price of essentials.
Executive Vice President of Merchandising Bill Boltz said that the company has seen “persistent pressure” on discretionary and do-it-yourself (DIY) spending since the third quarter of 2023. Ellison said Lowe’s is not able to predict exactly when home-improvement spending will improve, but said Lowe’s expects to be “in a strong position to take share when the market begins to inflect.”
Expanding Professional Market
To compensate for lower spending from DIY consumers, Lowe’s and Home Depot have each worked to increase their market share among professional contractors through acquisitions and shifts to their business. Lowe’s comparable store sales declined overall for the quarter but rose in its pro and online services.
“One thing we can confirm for sure is that our pro business is growing” as Lowe’s “strategic initiatives” mature, Ellison said.
“We now have the right brands for pros, the right inventory quantities, and the right product assortments to meet the needs of this demanding customer,” Boltz said. “Our strong pro performance in this challenging macro environment means that our efforts to transform the pro customer experience are working.”
Improving Digital Experience
Online sales were one of Lowe’s bright spots for the quarter, as comparable sales rose just under 3% in the segment from the same time last year.
Ellison said customers were responding to Lowe’s efforts to make convenience factors like same- or next-day delivery more widely available, with delivery options from the retailer as well as partners including Uber (UBER), DoorDash (DASH), and Instacart (CART).
The retailer has also expanded into tech, offering a kitchen design tool available through Apple’s (AAPL) Vision Pro, and exploring partnerships with other companies like Nvidia (NVDA) and OpenAI to create artificial intelligence (AI) tools for consumers and employees.
Cost, Productivity Improvements
Ellison said that Lowe’s has had to utilize “discipline expense management” as the retailer contends with declining sales.
Lowe’s Perpetual Productivity Improvement (PPI) programs to improve the efficiency of its supply chain and in-store employees are also paying dividends, Executive Vice President of Stores Joe McFarland said. McFarland cited examples including the “in-store mode” in the Lowe’s app, giving customers more information on their phone and freeing up employees to focus on sales.