A Lowe's location is seen in Westminster, Colo., on May 16, 2011.Rick Wilking/Reuters
Lowe’s Cos LOW-N on Tuesday joined larger rival Home Depot HD-N in signaling a slower recovery in the home-improvement market as consumers remain tight-fisted against the backdrop of sticky inflation and uncertainty over the economy’s prospects.
Investors were betting on a more normalized U.S. home improvement environment this year after 2023 was dubbed a transition period as the industry digested the outsized gains from the pandemic.
Persistent inflation and a stagnant housing market were forcing consumers to hold out on big-ticket purchases, CEO Marvin Ellison said on a post-earnings call.
“Unfortunately, it’s still very difficult to predict” when home improvement demand will inflect, Ellison said.
The company is particularly squeezed as Do-It-Yourself (DIY) customers, who generate 75 per cent of its total sales, are allocating fewer dollars to large-scale home remodeling and cutting back on discretionary items as they take up only necessary repair work.
Lowe’s forecast comparable sales to be down 2 per cent to 3 per cent in fiscal 2024, while analysts were expecting a 1.13 per cent drop.
“We expect comp sales to improve (in the second half) ... To be clear, we are not forecasting an improvement in demand trends this year. Rather, the compares are easier in the second half,” CFO Brandon Sink said.
The company is banking on its new DIY loyalty program, expected to roll out nationwide in March, to help draw demand from more value-sensitive customers.
The No.2 U.S. home-improvement chain projected annual per-share earnings between $12.00 and $12.30, versus LSEG estimates of $12.75.
“Maybe (the forecast is) telling us that the recovery is being pushed out a little bit,” D.A. Davidson analyst Michael Baker said.
Still, Lowe’s topped fourth-quarter expectations on demand from Pro-customers, sending its shares up 3 per cent in early trade.
Per-share profit of $1.77 beat estimates of $1.68, while same-store sales declined 6.2 per cent for the quarter ended Feb. 2, compared with expectations for a 7.06 per cent drop.