Key Takeaways
- Lowe’s posted weaker-than-expected second quarter sales as discretionary spending on large home improvement projects was lower than the same time last year.
- Home Depot and Lowe’s have been affected by a reduction in big-ticket spending in the home improvement sector as consumers deal with higher prices for essentials.
- Lowe’s lowered its full-year outlooks for both sales and profit, citing the decline in DIY sales and a “pressured macroeconomic environment.
Lowe’s (LOW) reported weaker-than-expected quarterly sales and lowered its outlook for the full year amid a slowdown in spending on big ticket home improvement projects.
The company said early Tuesday that total second-quarter sales fell 5.5% versus a year ago to $23.59 billion, which came in short of Wall Street expectations. Net income of $2.38 billion came in ahead of analysts’ estimates.
Lowe’s, like its rival Home Depot (HD), is contending with an ongoing slowdown in discretionary spending as consumers deal with high prices for essentials and interest rates that are at a two-decade high.
Pressure on Discretionary Spending
In a press release, Lowe’s attributed the decline in sales to “continued pressure in DIY bigger ticket discretionary spending,” a factor Lowe’s has cited for much of the last year, and said that unfavorable weather also affected certain categories. The company said those declines were partially offset by growth in digital operations and sales to professional contractors, a key market for Lowe’s and Home Depot.
Citing the low DIY sales and a “pressured macroeconomic environment,” Lowe’s lowered its full-year sales outlook to a range of $82.7 billion-$83.2 billion, from $84 billion-$85 billion previously. Comparable sales, which fell 5.1% in the second quarter, are expected to be down 3.5% to 4% for the full year, compared with a previous outlook for a decline of between 2% and 3%.
Lowe’s also trimmed its outlook for earnings per share (EPS) to $11.70-$11.90, down from $12.00-$12.30 previously.
JPMorgan analysts wrote Tuesday that Lowe’s earnings were “nothing surprising” considering the state of the home improvement industry in recent months, and said they maintain a “relatively positive view” of Lowe’s profit margin outlook going forward.
Lowe’s shares swayed in both directions in premarket trading Tuesday and were down about 0.3% to $242.50 about an hour before the opening bell.