Dive Brief:
- Lowe’s on Tuesday reported fourth-quarter net sales fell about 17% to $18.6 billion from $22.4 billion a year earlier. The home improvement retailer’s prior year Q4 sales included about $1.4 billion from a 53rd week on the calendar and $958 million from the sale of the company’s Canadian retail business during Q1 of last year.
- Net earnings for the quarter ending Feb. 2 were $1 billion, up about 4.5% from $957 million a year earlier. Operating income was nearly flat at $1.7 billion, while quarterly comps fell 6.2% due to a slowdown in DIY demand and unfavorable weather in January, the company said.
- For the full year, net sales declined 11% to $86.4 billion, down from $97.1 billion year over year, while annual operating income rose nearly 14% to $11.6 billion, up from $10.2 billion a year ago. Lowe’s reported net earnings of $7.7 billion for the year, up 20% from $6.4 billion year over year.
Dive Insight:
Lowe’s Q4 earnings beat expectations, analysts with Telsey Advisory Group, led by Joe Feldman, said in a note ahead of the call. “In the near term, the industry continues to face headwinds related to the weak housing market trends, consumers remaining cautious with spending, especially on big-ticket items and projects, and continued normalization from the pandemic-related gains from the past three years,” Feldman said.
“However, in the long term, Lowe's should remain a share gainer and benefit from its Total Home Strategy —focusing on the pro, enhancing digital, improving installation services, driving localization, and elevating the assortment,” said Feldman.
For the full year, Lowe’s expects total sales of $84 billion to $85 billion; a comp sales decline of 2% to 3%. Despite near-term uncertainty, CEO Marvin Ellison said on an earnings call the company is bullish on its medium to long-term outlook. Core demand drivers in home improvement include disposable personal income, home price appreciation and the rising age of housing stock. Alongside other trends like an undersupply of homes, baby boomers choosing to age in place millennials buying their first homes, and a sustained number of people working from home, “we are confident that home improvement demand will trend upwards over time across both homeowners and pros,” Ellison said.
In January, Lowe’s debuted a loyalty program aimed at driving DIY consumer traffic. The program’s benefits include free standard shipping for eligible items; early sales; and a customized in-app experience. About 75% of Lowe’s customers were DIYers in 2022. The MyLowe’s Rewards program will launch nationally in March. Ellison said Lowe’s will be the only national home improvement retailer with loyalty programs targeted at professional and DIY customers.
Although comparable pro sales were flat for Q4, as were online comp sales, Ellison said higher conversion rates and lower returns indicate that customers appear to be responding to the company’s improved digital experience and faster fulfillment.
Joe McFarland, executive vice president of stores also said on Tuesday’s earnings call that Lowe’s recently announced $140 million in discretionary year-end bonuses. Assistant store managers and frontline supervisors will receive $5,000. Full-time hourly associates will receive $400 and part-time hourly associates get $200.
