Lowe’s has lowered its full-year forecast due to declining quarterly sales and weak home improvement spending anticipated for the remainder of the year. The company now projects total sales to range between $82.7 billion and $83.2 billion, down from the previous estimate of $84 billion to $85 billion.
Additionally, comparable sales are expected to decline by 3.5% to 4%, a greater drop than the earlier forecast of 2% to 3%. Adjusted earnings per share are also anticipated to be lower, between $11.70 and $11.90, compared to the prior range of $12 to $12.30.
CEO Marvin Ellison explained that consumers are holding off on large purchases, awaiting potential interest rate cuts from the Federal Reserve. The current economic environment, characterized by high inflation and elevated interest rates, is causing shoppers to delay major home improvement projects.
Ellison noted that most Lowe’s customers are homeowners with fixed mortgage rates below 4%, making them reluctant to take on new mortgages or loans at higher rates.
In its fiscal second quarter, Lowe’s reported earnings per share of $4.10, slightly above Wall Street’s expectations, but its revenue of $23.59 billion fell short of the anticipated $23.91 billion.
The company’s net income dropped to $2.38 billion, down from $2.67 billion in the same period last year. Although a $43 million gain from the sale of its Canadian retail business boosted earnings, overall net sales decreased, marking the sixth consecutive quarter of year-over-year sales declines.
Despite the overall sales decline, Lowe’s saw growth in its online business and sales to home professionals, which offset some of the losses. Comparable sales to professionals, such as contractors and electricians, increased by mid-single digits, while online sales grew by 2.9%.
The company has been focused on attracting more professionals, who are more consistent and profitable customers, and this segment has become the strongest part of Lowe’s business.
The broader economic context is uncertain, with mixed signals regarding consumer health and spending. While job growth in July was lower than expected, companies like Walmart have not seen a significant deterioration in consumer health, and Goldman Sachs has reduced the likelihood of a recession.
However, for home improvement retailers like Lowe’s, the challenges posed by high mortgage rates and borrowing costs remain significant.
Despite these challenges, Ellison remains optimistic about the long-term outlook for the home improvement industry, citing factors such as an aging housing stock and demographic trends that favor home improvements.
