Dive Brief:
- Lowe’s on Wednesday cut its full-year outlook, expecting results to come in at the lower end of its previously issued guidance.
- The home improvement retailer expects total sales of $92 billion (compared to a range of $92 billion to $94 billion); comparable sales to be flat (versus flat to up 2%); and operating margin of 11.2% (versus 11.2% to 11.4%).
- The adjusted outlook comes as the home improvement retailer faces a pullback in spending from its DIY customers.
Dive Insight:
Lowe’s continues to face the effects of a weak housing market and consumer uncertainty.
CEO Marvin Ellison on Wednesday said discretionary DIY spending remained under pressure in the second quarter, weighing down comp sales. While the number of smaller projects increased 1.5% year over year, the number of larger, big-ticket projects fell over 2%, according to GlobalData research.
Lowe’s total Q2 sales increased 8.3% year over year to nearly $26 billion. Comps inched up 0.2% year over year — its fifth consecutive quarter of growth in that metric — largely driven by strength in Pro and home services sales, as well as a nearly 16% increase in online sales during the period.
Profits improved slightly, with operating income up 2.3% to $3.5 billion and net income essentially flat at $2.4 billion.
Like rival Home Depot, Lowe’s is leaning into its Pro customer segment, which delivered positive comps in the period.
Lowe’s has been making investments to boost this segment, particularly through an updated Pro loyalty program and enhanced digital tools, as well as through acquisitions like Artisan Design Group and Foundation Building Materials.
“This push into pro has the potential to produce a lot of upside for Lowe’s over the medium and longer term, though it must not lose sight of its core consumer business,” GlobalData Managing Director Neil Saunders said in emailed comments.
But executives were optimistic that the investments the retailer is making in its DIY segment — from loyalty program upgrades to fulfillment capabilities to merchandising assortment — will pay off once DIY demand returns.
“We think it's cyclical. We do think it's a moment in time,” Ellison said on a call with analysts Wednesday. “The good news is we deliver consecutive quarters of positive comps with a DIY penetration north of 60%. So we feel great about how we are managing our business in arguably one of the most difficult DIY environments. And we know the moment we get any type of macro tailwind, that our business is going to perform.”
