Lowe’s has recently encountered some financial difficulties, as reflected in their latest earnings report for the second quarter of 2024. The company reported a drop in total sales to $23.6 billion, down from $25 billion in the same period last year, and a 5.1% decrease in comparable sales. This decline is largely attributed to continued pressure in the DIY segment, particularly on big-ticket discretionary items, as well as unfavorable weather conditions affecting seasonal and outdoor product sales.
Lowe’s has revised its full-year forecast downward as the retailer faces declining sales and expects weaker home improvement spending in the second half of the year. The company now projects total sales to range between $82.7 billion and $83.2 billion, a decrease from the previous estimate of $84 billion to $85 billion. Additionally, Lowe’s expects comparable sales to drop by 3.5% to 4%, and anticipates adjusted earnings per share will fall between $11.70 and $11.90, down from the previous forecast of $12 to $12.30.
CEO Marvin Ellison explained that consumers are hesitant to make big-ticket purchases due to high inflation and elevated interest rates, leading to a delay in major home improvement projects. Ellison noted that most of Lowe’s customers are homeowners with fixed mortgage rates below 4%, making them reluctant to take out new loans at current higher rates.
Lowe’s beats earnings, misses sales in Q2; cuts full-year forecast @Lowes https://t.co/Bw8SNdCrBP
— RPM Media (@RetailPrintMed) August 20, 2024
For the fiscal second quarter, Lowe’s reported earnings per share of $4.10, surpassing Wall Street’s expectations of $3.97, while revenue came in at $23.59 billion, slightly below the anticipated $23.91 billion. Net income for the quarter was $2.38 billion, down from $2.67 billion in the same period last year. The company also experienced a 5.1% decline in comparable sales, marking the sixth consecutive quarter of year-over-year sales drops.
Despite these challenges, Lowe’s online sales and sales to home professionals showed growth, with pro sales rising by mid-single digits and online sales increasing by 2.9%. Ellison emphasized that the pro segment remains the strongest part of Lowe’s business, accounting for about 25% of total sales.
As the home improvement industry grapples with higher mortgage rates and borrowing costs, Lowe’s rival Home Depot has also reported similar challenges, projecting a weaker second half of the year. However, both companies maintain a positive long-term outlook for the industry, citing factors such as an aging U.S. housing stock, millennial household formation, and Baby Boomers adapting their homes as key drivers for future growth.
Key Points:
i. Lowe’s revised its full-year sales forecast downward, citing weaker home improvement spending.
ii. The company now expects a 3.5% to 4% decline in comparable sales for the year.
iii. Lowe’s reported second-quarter earnings of $4.10 per share, exceeding expectations, but revenue fell short at $23.59 billion.
iv. Online sales and sales to home professionals showed growth, with the pro segment being the strongest part of Lowe’s business.
v. The long-term outlook for the home improvement industry remains positive, despite current challenges.
Charles William III – Reprinted with permission of Whatfinger News
