Lowe’s, the home improvement retailer, has revised its full-year forecast after experiencing a decline in quarterly sales and expecting a slowdown in spending on do-it-yourself projects. The company now projects total sales between $82.7 billion and $83.2 billion for the year, down from its previous estimate of $84 billion to $85 billion. Additionally, it anticipates a decline in comparable sales of 3.5% to 4%, compared to its earlier forecast of a 2% to 3% decrease. Adjusted earnings per share are expected to range from $11.70 to $11.90, compared to the previous outlook of $12 to $12.30.
The decline in sales and revised forecast can be attributed to lower-than-expected DIY sales and a pressured macroeconomic environment, according to a news release by Lowe’s. The company reported earnings per share of $4.10, beating analysts’ expectations of $3.97. However, revenue came in at $23.59 billion, slightly lower than the expected $23.91 billion.
Lowe’s experienced a net income of $2.38 billion, or $4.17 per share, in the second quarter, compared to $2.67 billion, or $4.56 per share, in the same period last year. The company’s earnings were boosted by a $43 million gain from the sale of its Canadian retail business in 2022.
Despite the gain, net sales dropped from $24.96 billion in the prior year, marking the sixth consecutive quarter of sales decline for Lowe’s. Comparable sales, which exclude one-time factors like store openings and closures, decreased by 5.1%. This decline can be attributed to customers taking on fewer discretionary home projects and unfavorable weather conditions affecting sales of outdoor and seasonal items. However, Lowe’s saw growth in its online business and sales to home professionals, such as contractors and electricians, which partially offset the declines.
The current state of consumer spending is being closely monitored by investors and economists, particularly with regards to recent economic data and corporate earnings. While there have been mixed indications about American households’ financial health, with lower-than-expected jobs growth in July, Walmart’s CFO and Goldman Sachs have expressed confidence in the strength of consumer health. However, home improvement retailers like Lowe’s may face additional strain due to higher mortgage rates and increased borrowing costs.
Lowe’s rival, Home Depot, surpassed Wall Street’s expectations for earnings and revenue in its recent quarterly report. However, Home Depot also expects the second half of the year to be weaker than anticipated due to consumers having a “deferral mindset,” which can be attributed to higher interest rates and a sense of uncertainty in the economy.
Lowe’s stock closed at $243.21 on Monday, with a year-to-date increase of around 9%, trailing behind the 18% gains of the S&P 500. As the company faces challenges in the home improvement retail industry, it is crucial for Lowe’s to navigate the changing economic landscape and consumer behavior in order to maintain its market position.
