A Lowe’s store stands in Brooklyn on February 27, 2024 in New York City.
Spencer Platt | Getty Images
Lowe’s topped Wall Street’s quarterly earnings and revenue expectations on Wednesday and said its sales slump should end in the year ahead.
The home improvement retailer said it expects full-year total sales to range from $83.5 billion to $84.5 billion, which on the upper end would be higher than its total revenue of $83.67 billion for fiscal 2024. It said it expects comparable sales to be flat to up 1% year over year and earnings per share to range from approximately $12.15 to $12.40.
On the company’s earnings call, CEO Marvin Ellison stressed that Lowe’s still faces “a challenging home improvement market.”
He said high mortgage rates have created “a significant gap between today’s rates for homebuyers and the lower rates many homeowners currently enjoy,.” That’s led to a “lock-in effect” that’s kept consumers from buying and selling, he said.
Even so, he said, Lowe’s has pressed ahead with investments in its own strategy, such as attracting more business from home professionals, so it is “well-positioned to capitalize on the home improvement recovery and take share when the market inflects.”
Here’s what the company reported for the fiscal fourth quarter compared with what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: $1.93 adjusted vs. $1.84 expected
- Revenue: $18.55 billion vs. $18.29 billion expected
Lowe’s shares rose more than 3% in early trading, after the company’s leaders said they expected sales trends to improve, but still be roughly flat from last year.
In the three-month period that ended Jan. 31, Lowe’s net income was $1.13 billion, or $1.99 per share, compared with $1.02 billion, or $1.77 per share, in the year-ago period. Revenue fell from $18.60 billion in the year-ago quarter.
Lowe’s adjusted earnings per share figure excluded an $80 million pretax gain associated with the 2022 sale of its Canadian retail business, which added 6 cents per share to fourth-quarter earnings.
Investors are looking for signs that the home improvement market is picking up again. Slower housing turnover and higher borrowing costs have kept some customers on the sidelines. Lowe’s net sales for the 2024 fiscal year totaled $83.67 billion, down 3% from the prior fiscal year.
In the fiscal fourth quarter, trends looked better. Comparable sales rose 0.2%, boosted by online gains, high single-digit growth among home professionals and sales related to rebuilding efforts after hurricanes Milton and Helene. That slightly positive metric ended eight consecutive quarters of comparable sales declines. It also exceeded Wall Street’s expectations. Analysts had anticipated a 1.8% decline in comparable sales.
A tough housing market
Still, Lowe’s leaders said they have not seen changes in the housing backdrop. Ellison said on the earnings call that the company is closely tracking two factors that would indicate a return to more typical home improvement spending: an increase in do-it-yourself spending on pricier merchandise and more services spending, such as paying for home installations.
On the earnings call, CFO Brandon Sink said the retailer expects a “roughly flat” home improvement market this year, with sales from home professionals outpacing do-it-yourself customers because of repair and maintenance projects.
Lowe’s competitor, Home Depot, narrowly beat Wall Street’s fourth-quarter estimates on Tuesday and also snapped an eight consecutive quarter losing streak with comparable sales.
Yet Home Depot CFO Richard McPhail said the company doesn’t expect the housing market or mortgage rates to change. Instead, he told CNBC that he thinks consumers will gradually get used to elevated rates as “a new normal.”
Ellison echoed those sentiments on a call with CNBC, saying he expects homeowners and prospective homebuyers will hit a point when they accept the higher rates and decide to modernize the kitchen, finish the basement or build the deck anyways.
“I can’t give you the date, the time, but we think that we’re gonna see that take place, and when it does, we’re in a perfect position to capitalize on it,” he said.
How Lowe’s is trying to grow sales
With that tougher backdrop in mind, Lowe’s has tried to move the needle by investing in its online business, attracting more sales from contractors, electricians and other pros and expanding value-driven offers for homeowners.
Sales of major appliances, a category often driven by purchases after an item gets old or breaks, grew in the quarter compared to the year-ago period, said Bill Boltz, executive vice president of merchandising, on the company’s earnings call. He said Lowe’s has doubled the number of next-day deliveries over the past few years, and it can deliver and install major appliances the next day in almost every U.S. zip code.
Online sales grew 9.6% year over year, as customer traffic increased, especially on Black Friday and Cyber Monday.
As customers seek value, Lowe’s launched a new private brand called Lowe’s Essentials with products that cost $10 or less, such as closet hangers, gardening tools and water cans, Boltz said on the earnings call. Those items are on display near the front of stores.
Last year, Lowe’s launched a loyalty program for DIY customers. So far, it’s attracted 30 million members, and they are outspending non-members by nearly 50%, Boltz said on the earnings call.
“It’s clear that these customers see the value in this free program, which now gives them even more incentive to choose Lowe’s,” Boltz said.
During the key spring selling season, Lowe’s will offer exclusive deals and doorbusters for those members, he said.
Pros have been a growth area for Lowe’s, too, mostly because it had a lot of room for improvement, Ellison told CNBC. He described it as “one of the most broken parts” of Lowe’s business when he started as CEO in 2018.
The company has bulked up dedicated staffing for pros, adjusted its inventory to have the right mix of products and improved its website, so pros can easily place orders of items they buy frequently, he said.
Yet Lowe’s pro business is smaller than Home Depot’s. Sales from do-it-yourself customers account for roughly 70% of Lowe’s sales. At Home Depot, pro sales account for about half of the company’s sales and growing — especially after buying SRS Distribution, a company that sells supplies to professionals in the roofing, pool and landscaping businesses.
Ellison told CNBC that Lowe’s is waiting to reap the full benefits of changes it’s made across its business.
“We fixed our pro business,” he said. “We fixed our online business. We fixed our home service business. We dramatically improved our supply chain. The only thing that hasn’t happened for us is we haven’t had a healthy DIY homeowner since coming out of the pandemic.”
Shares of Lowe’s closed Tuesday at $242.39. As of Tuesday’s close, shares of the company have fallen nearly 2% this year. That trails behind the approximately 2% gains of the S&P 500 during the same period.
