Key Takeaways:
- Lowe’s reported third-quarter earnings and revenue that topped Wall Street estimates, showing resilience in a tough market.
- Despite the quarterly beat, the company lowered its full-year profit forecast, citing ongoing macroeconomic uncertainty.
- Shares for Lowe’s rose more than 6% in premarket trading after the company revealed a strong start to its current quarter.
- The move mirrors a similar guidance cut from rival Home Depot, signaling broader challenges in the housing and home improvement sectors.
Lowe’s reported strong third-quarter sales on Wednesday, but the home improvement giant trimmed its full-year profit forecast, pointing to a challenging economic environment. Despite the cautious outlook, the company’s stock climbed after it signaled a positive start to the current quarter.
Strong Q3 Performance
For the fiscal third quarter, Lowe’s posted adjusted earnings of $3.06 per share on revenue of $20.81 billion. This performance surpassed analysts’ expectations, who had anticipated earnings of $2.97 per share on $20.82 billion in revenue, according to LSEG.
Comparable sales, a key metric for retailers, saw a modest increase of 0.4% in the third quarter. CEO Marvin Ellison noted in a news release that the company also kicked off the fourth quarter with positive comparable sales, which helped boost investor confidence.
Cautious Outlook for the Year Ahead
While celebrating the quarterly win, Lowe’s adjusted its full-year guidance to reflect economic headwinds. The company now expects adjusted earnings of approximately $12.25 per share, which is at the lower end of its previously stated range.
The retailer also updated its sales forecast, projecting total sales of $86 billion for the year, an increase driven by its recent acquisition of Foundation Building Materials. However, it now expects comparable sales to be flat for the year, a downgrade from its prior forecast of flat to a 1% gain. The company stated the revision was made to “reflect the ongoing uncertainty in the macroeconomic environment.”
An Industry-Wide Trend
The cautious tone from Lowe’s is not an isolated event. Just a day earlier, its chief rival, Home Depot, also lowered its annual profit forecast. Home Depot’s CFO Richard McPhail attributed the downgrade to a tough housing market, weaker-than-usual storm activity, and general consumer uncertainty.
Both retailers are grappling with a slowdown in the housing market, driven by higher borrowing costs, which has dampened both do-it-yourself (DIY) projects and professional contractor work.
Focusing on the Pro Customer
To counteract the slowdown in consumer spending, Lowe’s has been strategically focused on growing its business with professional contractors. Its recent acquisitions, including Foundation Building Materials and Artisan Design Group, are central to this strategy. By acquiring distributors that serve large residential and commercial professionals, Lowe’s aims to secure a more stable revenue stream and offset the volatility in the DIY market.