Dive Brief:
- As the housing market remains pressured, Lowe’s is cutting jobs and issuing what executives themselves are describing as “cautious” financial guidance for the year ahead. The home retailer slashed 600 corporate and support roles earlier this month as part of its productivity initiatives.
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As to guidance, the home improvement retailer expects full-year total sales to be between $92 billion and $94 billion, a 7% to 9% increase from the prior year, and comparable sales to be flat to up 2%. Capital expenditures are projected to be $2.5 billion.
- It comes as Lowe’s reported fourth quarter net sales increased 10.9% year over year to $20.6 billion and comps grew 1.3%.
Dive Insight:
Poor consumer outlook, elevated mortgage rates and low housing turnover continue to pressure the home sector, and any improvement is likely to be gradual, Lowe’s CEO Marvin Ellison told analysts Wednesday.
Despite this, Lowe’s delivered better-than-expected revenue and comp results in the fourth quarter. The company attributed the comps increase to a strong holiday performance, as well as growth in pro, online and home services sales. Lowe’s saw nine of its 14 merchandising categories deliver positive comps, including electrical, kitchen and baths, paint and millwork.
But the uncertainty presented by the housing market has continued “to pressure big-ticket discretionary DIY projects as many consumers are reluctant to make significant investments in their homes within this challenging macro environment,” Ellison said.
In response, Lowe’s is working on increasing efficiency, including through layoffs.
“Although these are difficult decisions to make, this workforce reduction will help us create greater financial agility within our dynamic industry, while continuing to invest in customer-facing areas of the company,” Ellison said.
The retailer is focused on managing “what is within our control,” including bolstering its online, home services and pro offerings, he added.
To the latter point, Lowe’s has been building out its pro business through the recent acquisitions of Foundation Building Materials and Artisan Design Group.
“We're confident that these investments position the company to outperform the market regardless of macro conditions,” Ellison said. “With these recent acquisitions … we are well positioned to participate in the expected recovery in housing.”
While rival Home Depot remains the preferred destination for high-spending pros, “Lowe’s has carved out more significant market share in the small and medium pro space – including taking some business away from Home Depot,” GlobalData Managing Director Neil Saunders said in emailed comments.
“This segment is robust because, while bigger work like full remodels might be down, tradespeople have been pivoting to smaller decorative projects which has kept their appetite for products high,” he said.
