Dive Brief:
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Lowe’s Tuesday lowered its full-year guidance after Q2 was hit by unfavorable weather and consumer sentiment. The company expects total sales to land between $82.7 billion and $83.2 billion, down from its previous expectation for $84 billion to $85 billion; comps are expected to fall 3.5% to 4%, worse than the earlier 2% to 3% estimate.
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The home improvement retailer reported that Q2 net sales fell 5.5% year over year to $23.6 billion, with comps down 5.1%.
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Gross margin was about flat to last year at 33.5%, and net earnings fell 10.8% to $2.4 billion.
Dive Insight:
Earlier this year in much of the country, rainy weather followed by hotter-than-usual temperatures interfered with Lowe’s sales to do-it-yourself consumers and pros, though pro sales in Q2 were relatively stronger. Lowe’s said that the comp decline in the period was driven by ongoing softness in DIY demand and weather that kept customers indoors. But that was “partially offset by positive comparable sales in Pro and online,” per its press release.
The home improvement segment has had some recovery from its late-pandemic downturn. During the disease outbreak many consumers, stuck at home, fixed up their houses and living spaces, but home improvement and furniture sales have stagnated since then. That has eased somewhat, with Placer.ai finding that, so far this year, traffic to both Lowe’s and rival Home Depot stores has outpaced 2023 somewhat.
Higher interest rates have slowed the housing market, and that has also dampened sales. While the Federal Reserve is widely expected to lower interest rates in coming weeks, the timing of any impact is unclear, Lowe’s executives told analysts Tuesday.
“For us, it's difficult to know at what absolute interest rate level we're going to see our consumers fully engage, or how long the demand will lag the actual rate cuts that we're seeing,” Chief Financial Officer Brandon Sink told analysts. “We absolutely, as we sit here today, see pent up demand in the business.”
For now, the housing marketing is expected to remain soft and consumers are likely to remain cautious, particularly when it comes to pricey items like appliances or expensive home improvement projects, according to a Tuesday note from Telsey Advisory Group analysts led by Joseph Feldman. Still, Lowe’s is well positioned to, as Lowe’s CEO Marvin Ellison said on the call, take advantage of the macro inflection whenever it occurs.
“In the long term, Lowe's should remain a share gainer and benefit from its Total Home Strategy — focusing on the Pro, enhancing digital, driving localization, and elevating the assortment,” Telsey’s Feldman said.
