The Lowe’s store is standing in Brooklyn on February 27, 2024 in New York City.
Spencer Platt | Getty Images
Lowes He broke Wall Street’s quarterly revenue and revenue expectations on Wednesday, saying its poor sales should close in the next year.
The home improvement retailer said it expects its full-year total revenue to range between $83.5 billion and $84.5 billion. It said this would be higher than total revenue of $83.677 billion for fiscal year 2024.
In a call to the company’s revenue, CEO Marvin Ellison stressed that Lowe still faces a “challenging housing improvement market.”
He said the high mortgage rates “created a huge gap between the current rates of homebuyers and the low rates that many homeowners currently enjoy.” It led to a “lock-in effect” that prevented consumers from buying and selling, he said.
Still, he said Lowes is pushing for investment in its own strategy, including attracting more businesses from home professionals, so it is “suitable to take advantage of the recovery in housing improvements and share it when the market changes.”
Based on an analyst survey by LSEG, the company reported in the fourth quarter compared to what Wall Street had forecast:
Earnings per share: $1.93 adjusted vs. $1.84 expected revenue: $18.55 billion vs. $182.9 billion
Lowe’s shares rose nearly 2% on Wednesday. The company’s leaders said they had hoped sales trends would improve but would remain largely flat since last year.
For the three-month period ended January 31, Lowe’s net income was $130 million or $1.99 per share, compared to $1.02 billion in the same period last year ($1.77 per share). Revenues fell from $18.6 billion in the last quarter.
Lowe’s adjusted per share figures excluded $80 million pre-tax profit related to the 2022 sale of its Canadian retail business, adding 6 cents per share to its fourth quarter revenue.
Investors are looking for signs that the housing improvement market is being re-evaluated. As home sales slower and borrowing costs increased, some customers were on the sidelines. Row’s net sales totaled $83.677 billion for fiscal year 2024, down 3% from the previous fiscal year.
In the fourth quarter, the trend looked good. Equivalent sales increased by 0.2%, with online profits, single-digit growth among housing professionals, and sales related to reconstruction efforts after Hurricanes Milton and Helen. That slightly positive metric concluded eight consecutive quarters with comparable sales declines. It also exceeded Wall Street expectations. Analysts expected comparable sales to fall by 1.8%.
The tough housing market
Still, Lowe’s leaders said they have not seen a change in the context of the housing. Ellison said in his revenue call that the company is closely tracking two factors indicating a return to a more typical home improvement spending. That’s more do-it-yourself spending on more expensive items and more services spending, including payments for home equipment.
In a revenue call, CFO Brandon Sink said retailers are hoping for a “nearly flat” home improvement market this year, and expecting sales from home professionals to surpass their do-it-yourself customers due to repair and maintenance projects.
Low’s competitors, Home Depotslightly beating Wall Street’s fourth quarter estimates on Tuesday, snapping eighth consecutive quarter losses with comparable sales.
However, Home Depot CFO Richard McPhail said the company does not expect the housing market or mortgage fees to change. Instead, he told CNBC he believes consumers will gradually become accustomed to the rates rising as “new normal.”
Ellison reflected these sentiments in his call with CNBC, saying he hopes homeowners and future homebuyers will earn points when they decide to accept higher rates, modernize their kitchens, finish their basements and build decks.
“I can’t give you dates and time, but I think we’re going to see it happen, and when it happens, we’re in the best position to take advantage of it,” he said.
How Lowes is trying to increase sales?
With that challenging background in mind, Lowes tried to move the needle by investing in online businesses, increasing sales from contractors, electricians and other reinforcement groups, and expanding value-driven offers for homeowners.
Sales of major appliances, a category caused by purchases after products have become outdated or have a break, increased quarterly compared to those in those days, Bilboltz, executive vice president of merchandising, said in our revenue call. He said Lowes has doubled the number of next-day delivery in the last few years, and that the next day can deliver and install major appliances in almost any US postal code.
Online sales increased 9.6% year-on-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 under $10 products, including closet hangers, gardening tools and water cans, Boltz said in a revenue call. These items are on display near the front of the store.
Last year, Lowe launched a loyalty program for DIY customers. So far, they have attracted 30 million members, and they are non-members who spend nearly 50%, Boltz said in a revenue call.
“It’s clear that these customers see value in this free program, which gives them even more incentives to choose Lowes,” Boltz said.
During the major spring sales season, Lowes will offer exclusive deals and doorbusters for those members, he said.
Ellison told CNBC. When he started as CEO in 2018, he described it as “one of the most broken parts” of Lowe’s business.
The company bent over professional dedicated personnel, adjusting inventory and adjusting the right combination of products and improving its website, making it easy for professionals to place orders for items they often buy.
However, Lowe’s Pro business is smaller than Home Depot. Sales from do-it-yourself customers account for around 70% of Law’s sales. Home Depot sells Pro sales for about half of the company’s sales and growth, especially after purchasing SRS Distribution, which sells supplies to professionals in the roof, pool and landscape business.
Ellison told CNBC that Lowes is waiting to enjoy the full benefits of changes made throughout the business.
“We’ve fixed our pro business,” he said. “We fixed our online business. We fixed our home services business. We improved our supply chain dramatically. What’s not happening for us is that we have not had a healthy DIY homeowner since we left the pandemic.”
Lowe’s shares closed at $247.07 on Wednesday. As of the end of Wednesday, the company’s shares have so far increased by less than 1% this year. This is roughly in line with the 1% profit of the S&P 500 over the same period.
