A customer pushes a shopping cart towards the doorway of a Lowe’s store in Concord, California, on Tuesday, Feb. 23, 2021.
David Paul Morris | Bloomberg | Getty Images
Lowe’s on Wednesday reported second-quarter earnings that beat analysts’ expectations as the corporate said improved operations offset lower-than-expected sales that were hurt by a shortened spring.
The house improvement retailer said sales to do-it-yourself customers were also hurt by lower demand for certain discretionary items, specifically in seasonal products like patio furniture and grills and a few popular pandemic products corresponding to freezers.
Transaction volume was down 6% over the quarter, but average ticket rose 6.5% partially attributable to inflation. CEO Marvin Ellison said despite rising costs, the buyer looks healthy.
“Slightly than the DIY consumer trading down such as you hear from some retailers, in lots of cases we were seeing the alternative,” Ellison told CNBC. “The client’s actually trading as much as innovation and trading up for brand new.”
Comparable sales fell 0.3% overall, though home improvement within the U.S. saw a slight growth of 0.2% versus the identical quarter last yr.
Lowe’s saw a rise in sales to professionals corresponding to contractors and electricians. Ellison said the corporate’s latest loyalty programs are attracting more skilled contractors and driving repeat visits. Professionals who were enrolled in this system spent 3 times greater than those not enrolled, he said.
Though homebuilder sentiment turned negative this month, Ellison stays optimistic in regards to the state of home improvement. He noted the age of homes, the extent of disposable income, and housing price appreciation all suggest continued strength in Lowe’s home improvement business.
Here’s what the corporate reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $4.67 cents, adjusted, vs. $4.58 expected
- Revenue: $27.48 billion vs. $28.12 billion expected
Lowe’s said it now expects total and comparable sales for the yr toward the underside of its outlook range. It had forecast sales of $97 billion to $99 billion and comparable sales to be down 1% to up 1%. Operating income and earnings are expected to be toward the highest end of its previous forecast.
“We expect our DIY customer and demand to enhance within the back half of the yr,” Ellison told CNBC. “We also expect to proceed to have accelerated growth with the professional customer.”
Shares of the corporate were up around 3% in pre-market trading.
For the three month period ended July 29, Lowe’s reported a net income of $2.99 billion, down from $3.02 billion last yr. Net sales slipped to $27.48 billion, from $27.57 billion a yr ago.
The outcomes come after Home Depot on Tuesday reported better-than-expected earnings and revenue for the second quarter, and stood by its forecast. Many individuals took up home improvement projects as they hunkered down through the pandemic, and investors have been watching to see whether that spending is holding up
Lowe’s has a unique customer mix than Home Depot, which tends to get more of its sales from home professionals. Lowe relies more heavily on do-it-yourself customers, which makes it more vulnerable to shifts in demand.
“Our leads to the primary half were disproportionately impacted by our 75% DIY customer mix, which was partially offset by our double-digit Pro growth for the ninth consecutive quarter,” Ellison said in an announcement.