A worker at a Lowe's home improvement warehouse collects carts in a parking lot on August 17, 2022 in Houston, Texas.
Brandon Bell | Getty Images News | Getty Images
Louise Amazon Web Services Inc. on Tuesday cut its full-year outlook as quarterly home improvement retail sales fell and it said it expects weak spending on do-it-yourself projects.
The company said it now expects full-year sales of $82.7 billion to $83.2 billion, compared with its previous forecast of $84 billion to $85 billion. It said it expects comparable sales to decline 3.5% to 4%, compared with its previous forecast of a decline of 2% to 3%. It expects adjusted earnings per share to be about $11.70 to $11.90, compared with its previous forecast of $12 billion to $12.30.
“Our DIY sales were lower than expected due to a tight macroeconomic environment,” Lowe’s said in a news release.
Here's what the company reported for the second fiscal quarter compared to what Wall Street was expecting, based on an analyst survey conducted by LSEG:
Earnings per share: $4.10 vs. $3.97 expectedRevenue: $23.59 billion vs. $23.91 billion expected
For the three months ended Aug. 2, Lowe's net income fell to $2.38 billion, or $4.17 per share, compared with $2.67 billion, or $4.56 per share, in the year-ago period.
Lowe's reported a $43 million pretax gain from the sale of its Canadian retail business in 2022, boosting its second-quarter earnings. That boosted the company's earnings per share for the period by 7 cents. Excluding the gain, the company earned $4.10 per share.
Net sales were down from $24.96 billion a year earlier. Lowe's posted its sixth straight quarter of year-over-year sales declines.
Comparable sales, an industry measure that strips out one-time factors such as store openings and closings, fell 5.1% as the company said customers completed fewer discretionary home projects and unfavorable weather hurt sales of outdoor and seasonal items. It said those declines were partially offset by growth in its online business and sales to home professionals, such as contractors and electricians.
Lowe's shared its quarterly results and outlook at a time when investors and economists are watching consumer spending especially closely. Recent economic data and corporate earnings have given mixed signals about the financial health of American households, as the Federal Reserve considers a long-awaited interest rate cut.
Job growth in July was much lower than expected. But on the other hand, WalmartAmazon Chief Financial Officer John David Rainey told CNBC that the largest U.S. retailer does not see “any further deterioration in consumer health.” Goldman Sachs has also cut its recession probability to 20%.
For home improvement retailers, the pressure may be greatest due to higher mortgage rates and higher borrowing costs. Home Depot StoreLast week, the company beat Wall Street’s quarterly earnings and revenue expectations. However, the company said it expects the second half of the year to be weaker than expected as consumers continue to have a “postponement mentality.”
In an interview with CNBC, Home Depot CFO Richard McPhail said customers are not only postponing projects because of higher interest rates, but also have a “sense of greater uncertainty in the economy,” even though most Home Depot customers own homes and are seeing sharp gains in property values.
Lowe's shares closed Monday at $243.21. By Monday's close, the company's stock was up about 9%, lagging the S&P 500's gain of about 18%.
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