Lowe’s (Low) Earnings Q1 2023 |usa4world

Lowe’s It cut its full-year outlook on Tuesday as lumber prices slumped, adverse weather hurt demand for seasonal goods and do-it-yourself customers bought fewer big-ticket items.

Shares of the company closed nearly 2% higher on Tuesday, however, after the retailer beat Wall Street’s revenue and earnings expectations for its fiscal first quarter.

On a call with investors, CEO Marvin Ellison said the company expects a “decrease in near-term discretionary consumer spending.”

Yet Lowe’s is better positioned than other retailers, he said. Two-thirds of its sales come from non-discretionary purchases, such as new equipment to replace broken ones.

US housing stock is getting older, which drives more repairs and other projects, That said, as the days are getting sunnier and warmer, sales of the spring categories are on the rise again.

“While we cannot predict the duration of what we think will be more short-term turbulence, we think the medium and long-term health of this segment is incredibly strong,” he added.

Ellison said the company hasn’t seen any change in demand in markets where rising interest rates have contributed to lower home prices. He declined to share details on May sales trends, but said they are in line with the company’s guidance.

Here’s what the company reported for the three-month period ended May 5, compared with what Wall Street expected, based on a survey of analysts by Refinitiv:

  • Earnings per share: $3.67 adjusted versus $3.44 expected
  • Revenue: $22.35 billion vs. $21.6 billion expected

Lowe’s net income for the three-month period was $2.26 billion, or $3.77 per share, compared with $2.33 billion, or $3.51 per share, a year earlier.

Net sales fell nearly 6% to $22.35 billion from $23.66 billion in the year-ago period, but exceeded Wall Street’s expectations.

Comparable sales declined 4.3% in the fiscal first quarter. That’s less than the 3.4% decline expected by Wall Street, according to Street Account.

Lowe’s is the latest retailer to warn of slower sales ahead, as consumers become frugal and reluctant to spend on discretionary items. many other retailers including walmart , TargetĀ  And home depot Less buying than necessary was also observed.

Lowe said it now expects total sales for the full year to be between $87 billion and $89 billion, down from the $88 billion to $90 billion it previously forecast. It added that comparable sales are expected to decline by 2% to 4% this fiscal, lower than the 2% reported earlier.

It said adjusted earnings per share would be between $13.20 and $13.60, down from its previous range of $13.60 to $14.00.

However, for Lowe’s and Home Depot, the time of year adds importance. Spring is the biggest sales season for home improvements.

Companies are competing not only for shoppers’ dollars, as grocery prices are higher and household budgets are higher as well. They are also dealing with changes in demand, as domestic projects driven by the COVID pandemic slow down and consumers pursue other spending priorities such as travel, summer vacations and restaurant dining.

Lowe’s competitor, home depot reported a revenue lapse in its quarterly report last week. The company missed sales expectations for the second quarter in a row and cut its full-year forecast as customers shunned big-ticket items like grills and opted for smaller, less expensive home projects.

Like Lowe’s, Home Depot also reported lower sales in the western US due to cooler and wetter weather and falling lumber prices.

However, Lowe’s and Home Depot have a different mix of sales. About 75% of Lowe’s sales come from DIY customers, while Home Depot typically gets about half of its sales from home professionals.

Under Ellison’s leadership, Lowe’s has attracted home professionals, who are a steady source of business, less vulnerable to inclement weather and more likely to complete a project. It has also relaunched its loyalty program for those plumbers, contractors and electricians and followed up with website improvements.

E-commerce was one of the strengths of the quarter. Online sales grew 6% compared to a year ago, Ellison said on the call, as home professionals shopped on the company’s website and DIY customers turned to the site to help visualize and estimate before tackling a project. Used digital tools.

Comparable sales of home pros also increased in the first quarter compared to the year-ago period. However, the majority of Lowe’s business — about 75% — comes from DIY customers.

CFO Brandon Sink said Lowe’s overall comparable sales were negative every month of the quarter, but the sharpest year-over-year decline came in March, as the metric declined 5.4%. Comparable sales fell 3% in February and fell 3.9% in April. He attributed the shortfall to unfavorable weather in March and April.

Sink said Lowe’s expects sales to professionals to overtake DIY buyers for the rest of the year. He said that professionals have a good job pool and still demand is being seen from the clients.

The retailer also pursued new sales opportunities in rural areas during the quarter. At some stores, it has expanded the mix of merchandise to add more apparel and farm or farm-type items, which have higher profit margins. In some of these markets, Lowe’s competes with other players. tractor supply.

Shares of Lowe’s closed at $203.15 on Monday, giving the company a market value of $121.15 billion. Its stock is up about 2% so far this year, trailing the S&P 500’s 9% gain.

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