Lowe’s (LOW) posted results that beat the Street’s estimates, but investors are honing in on its ongoing negative sales growth.
The home improvement retailer posted revenue of $20.17 billion, compared to estimates of $19.93 billion. Adjusted earnings per share came in at $2.89, versus the $2.82 expected.
“Our results this quarter were modestly better-than-expected, even excluding storm-related activity, driven by high-single-digit positive comps in Pro, strong online sales and smaller-ticket outdoor DIY projects,” Lowe’s CEO Marvin Ellison said on its earnings release.
Same-store sales growth is down 1.1%, less than the 2.7% decline anticipated. Continuing softness from DIY shoppers were partially offset by hurricane-related recovery efforts following Hurricanes Helene and Milton and positive same-store sales in its Pro business and online.
“Consumers continue to face affordability challenges as both inflation and interest rates are putting pressure on their wallet. Mortgage rates also remained stubbornly high,” Ellison said on Lowe’s earnings call.
Rates for the 30-year fixed edged higher again this week, hitting 6.96%.
“Combined with the lack of available homes for sale, housing turnover remains near 30-year lows… It’s unclear when lower rates and improved consumer sentiment will translate into improved home improvement demand,” Ellison added.
TD Cowen analyst Max Rakhlenko said the company is “well positioned for the next Home Improvement Cycle.”
Positive catalysts in the near future include more Fed rate cuts, hurricane-related recovery efforts, and normalizing “post-pandemic demand trends,” per Feldman.
“Lower interest rates [are] expected to spur increased consumer spending in the coming months — historically, there has been about a six to nine-month lag from the first rate cut, particularly in home improvement,” he wrote.
In Q3, the Pro business grew high single-digit positive comps, driven by investments the company made to “better serve the small-to medium-sized Pro,” which is its core Pro customer. However, the DIY customer makes up roughly 75% of Lowe’s business.
Lowe’s stock moved 3% lower in early trading on Tuesday. The company is expected to end the year with total net sales in the range of $83 billion to $83.5 billion, slightly higher than the previously expected range of $82.7 billion to $83.2 billion.
Same-store sales growth is projected to end the year down 3% to 3.5% year over year, compared to the previously expected decline of 3.5% to 4%.
