Lowe’s (NYSE:LOW) has once again exceeded expectations, despite a slowdown in DIY consumer activity, reflecting resilience amidst challenging market conditions.
On Tuesday morning, the home improvement retailer reported revenue of $21.36 billion, surpassing Wall Street’s estimate of $21.13 billion. Although same-store sales experienced a 4.1% decline, an improvement from the 4.3% drop in Q1 of the previous year, CEO Marvin Ellison highlighted positive comparable sales in the Pro and online segments.
Ellison acknowledged the impact of a reduction in everyday customers engaging in major purchases, which was partially offset by robust performance in Pro and online sales. He attributed Lowe’s success to strong execution and enhanced customer service initiatives, including the national rollout of a DIY loyalty program and expanded same-day delivery partnerships with platforms like DoorDash (DASH).
The company’s investment in the Total Home strategy, aimed at catering to both DIYers and professionals, has proven fruitful, evident in the growth of the Pro and online segments.
Despite adjusted earnings per share coming in at $3.06, higher than the expected $2.95, there was a decline compared to the $3.67 reported a year ago.
Telsey Advisory Group’s Joe Feldman maintained a Hold rating on Lowe’s, citing industry headwinds such as weak housing market trends and consumer caution in spending on big-ticket items.
Consumer sentiment has been influenced by factors such as monetary tightening and a slowdown in existing home sales, with CFO Brandon Sink noting that shoppers are adopting a cautious approach.
However, Ellison expressed optimism, stating that Lowe’s is prepared to capitalize on positive trends once they emerge.
Lowe’s focus on serving professionals, akin to Home Depot (HD), could drive future sales growth. Additionally, strategies such as digital enhancement, improved installation services, localized offerings, and assortment elevation are poised to further propel growth.
Similar to Home Depot, Lowe’s observed a shift in consumer spending towards services and experienced a decline in larger DIY projects, indicative of a preference for experiences over home renovations.
While Lowe’s stock has experienced a modest 2% increase year to date, it lags behind the S&P 500’s 11% gain.
Looking ahead, Lowe’s reaffirmed its 2024 outlook, anticipating total sales of $84 to $85 billion, with same-store sales projected to decline by 2% to 3% year over year. Despite challenges posed by interest rate cuts and inflationary pressures, Ellison remains optimistic about Lowe’s ability to navigate through uncertain times.
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