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Spokane, Washington  Est. May 19, 1883

Lowe’s shares drop on soft home-improvement outlook

A Lowe’s store is seen in Miami.  (Eva Marie Uzcategui/Bloomberg)
By Jaewon Kang Washington Post

Lowe’s Cos. shares declined after the retailer cautioned that home-improvement spending will remain muted in coming months.

Comparable sales, a key metric for the industry, fell 4.1% in the first quarter, though they were better than analysts projected. The company said it expects sales trends to be similar in the second quarter.

The shares were down 2.2% in New York trading at 10:03 a.m. They were up 3% this year through Monday, trailing the 11% gain of the S&P 500 Index.

Chief Executive Officer Marvin R. Ellison said on a call with analysts that uncertainty around interest rates and inflation continues to weigh on home-improvement demand, as does a preference for discretionary services over goods.

Lowe’s executives said consumers remain on the sidelines with bigger purchases, though smaller garden and lawn projects have been popular this spring.

The retailer’s professional-contractor business was a bright spot in the quarter, increasing in sales.

“This customer has proved resilient,” Ellison said of professional contractors, who represent about 25% of the company’s sales. Lowe’s is focusing on small to midsize professionals such as repair contractors and project managers.

Online sales rose about 1% for the quarter, he added, and the retailer expanded same-day delivery.

Inflation and high interest rates have hurt consumers’ appetites for big purchases, eroding sales at Lowe’s and its main rival, Home Depot Inc., in recent quarters. Consumers have held off on renovating and remodeling homes after rushing to do so during the pandemic.

Lowe’s posted gross profit of $7.09 billion, down about 6% compared with last year but still ahead of analysts’ estimates.

Lowe’s, based in Mooresville, North Carolina, affirmed its full-year outlook. It previously projected a decline of 2% to 3% for comparable sales for the period, and on Tuesday reiterated an outlook for total sales of $84 billion to $85 billion.

Home Depot posted negative quarterly sales last week, citing weakness in large discretionary projects. Meanwhile, Walmart Inc. reported higher sales despite softness in the general merchandise category as more affluent shoppers are drawn to its lower prices. Target Corp. is the next major U.S. retailer scheduled to report results, on Wednesday.