Home Improvement Sales Decline Hits Lowe’s Hard
Lowe’s Companies Inc. (NYSE:LOW) reported a significant drop in sales for the second quarter, reflecting ongoing challenges in the home improvement sector. Sales fell 5.6% year-over-year to $23.59 billion, missing expectations. Same-store sales, a crucial indicator of retail performance, decreased by 5.1%, surpassing the anticipated decline of 4.43%. The company attributed the drop to continued pressure on larger do-it-yourself (DIY) projects and adverse weather conditions affecting seasonal and outdoor sales. This decline was steeper than the 3.3% decrease reported by competitor Home Depot Inc. (NYSE:HD) for the same period.
Despite positive results in its Pro and Online businesses, Lowe’s is facing its seventh consecutive quarter of declining sales. CEO Marvin Ellison highlighted the company’s strong operational performance and improved customer service amid a challenging economic environment for homeowners. Shares of Lowe’s saw a slight increase in premarket trading after the company exceeded Wall Street profit estimates by $0.13.
Revised 2024 Outlook
In light of the pressures faced during the first half of the year, Lowe’s has revised its full-year 2024 outlook downward. The company now expects total sales to range from $82.7 billion to $83.2 billion, lower than the previous forecast of $84 billion to $85 billion. Same-store sales are anticipated to decline by 3.5% to 4%, worse than the earlier forecast of a 2% to 3% drop. This adjustment reflects broader concerns within the home improvement sector as both Lowe’s and Home Depot contend with a sluggish housing market and high interest rates.
Home Depot also experienced its seventh consecutive quarter of negative sales growth, with a 3.6% decline in U.S. same-store sales. The company reported reductions in both foot traffic and average ticket size by 1.8% and 1.3%, respectively, and issued a cautious outlook for the year. Comparable sales are projected to fall between 3% and 4%, compared to the previous expectation of a 1% decline. This implies continued pressure on consumer demand.
Sector-Wide Concerns and Future Outlook
Concerns about the home improvement sector are underscored by weak results from suppliers such as Stanley Black & Decker Inc. (NYSE:SWK), Floor & Decor Holdings Inc. (NYSE:FND), and Tractor Supply Company (NASDAQ:TSCO). Telsey Advisory Group’s Joe Feldman noted that tight monetary policy and high mortgage rates are impacting the housing market. Goldman Sachs Chief Economist Jan Hatzius pointed out that while the housing market remains soft, a gradual improvement is expected as interest rates decrease.
Looking ahead, TD Cowen analyst Max Rakhlenko suggested that attention will shift to potential recovery starting in fiscal year 2025. Lowe’s DIY business is expected to rebound strongly, while the Pro segment should continue to gain market share. Over the past year, shares of both Home Depot and Lowe’s have lagged the S&P 500 by 18 percentage points, highlighting the ongoing challenges faced by the home improvement sector.
Quarterly Performance vs. Estimates
Lowe’s second-quarter results compared to Wall Street estimates were as follows:
- Revenue: Down 5.6% year-over-year to $23.59 billion, versus a $23.9 billion estimate
- Adjusted Earnings Per Share: Down 10.1% year-over-year to $4.10, exceeding the $3.97 estimate
- Same-Store Sales Growth: Down 5.1%, compared to the 4.43% estimate
Featured Image: Megapixl
