source-Entrepreneur
Lowe’s, a major player in the home improvement retail sector, has announced a downward revision in its annual sales forecast after experiencing a staggering drop of nearly 13% in its fiscal third-quarter sales compared to the previous year.
Revised Projections
The company, originally anticipating sales to reach between $87 billion to $89 billion for the fiscal year, now expects figures to hover around $86 billion. This downward shift extends to projected comparable sales, with an estimated decline of about 5% for the fiscal year, marking a worsened outlook compared to the earlier prediction of 2% to 4%. The adjusted earnings per share are also adjusted downward, now expected to be around $13 compared to the initial range of $13.20 to $13.60.
CEO Marvin Ellison acknowledged a significant decline in consumer spending on discretionary projects and high-ticket purchases, attributing this trend to a “greater-than-expected pullback.” He did, however, note an increase in sales to home professionals, a segment contributing a substantial 25% to Lowe’s overall business. As the holiday season approaches, Ellison emphasized the company’s commitment to delivering value and convenience, particularly focusing on offerings like Christmas trees and decorations.
Lowe’s Cuts Sales Forecast as Same-Store Sales Fall 7.4%
Market Challenges and Resilience
Similar to its rival, Home Depot, Lowe’s is grappling with diminished demand as the pandemic-fueled enthusiasm for home improvement begins to moderate. Additionally, higher mortgage rates have introduced new uncertainties into the housing market landscape.
Despite these challenges, Ellison remains optimistic about the long-term prospects of the home improvement market. He highlighted the limited housing stock and aging housing inventory across the United States as factors supporting the market’s potential.
Financial Performance and Market Position
In the fiscal third quarter, Lowe’s reported a net income of $1.77 billion, or $3.06 per share—a significant increase from $154 million, or 25 cents per share, in the same period last year. However, these figures were affected by a $2.1 billion impairment charge linked to the company’s exit from the Canadian market. Net sales also witnessed a decline from $23.48 billion compared to the previous year.
Meanwhile, Lowe’s competitor, Home Depot, surpassed Wall Street’s expectations in its fiscal third-quarter earnings and revenue, despite a 3% decline in sales year over year. Home Depot highlighted a trend among customers engaging in smaller and less expensive home improvement projects.
Market Performance and Future Outlook
Despite a modest 3% increase in Lowe’s shares this year, the stock trails behind the approximately 18% gains of the S&P 500. As of Monday’s closing, Lowe’s stock stood at $204.44, with the company’s market value nearing $118 billion.
