Dive Brief:
- Lowe’s reported first quarter net sales of $21.4 billion, down 4.4% from $22.3 billion year over year. The company said Tuesday that Q1’s comparable sales fell 4% due to a decline in DIY big-ticket discretionary spending partially offset by positive comps in online and pro sales.
- Despite soft performance, the home improvement retailer’s results beat analysts’ expectations, with operating income of $2.7 billion, down 19% from $3.3 billion a year ago. Net earnings declined 22% to $1.8 billion, down from $2.3 billion a year ago.
- Lowe’s is maintaining its full-year guidance, which anticipates sales ranging from $84 billion to $85 billion and comps down 2% to 3% versus a year ago. Rival retailer Home Depot’s Q1 results last week missed analysts’ and Wall Street’s expectations.
Dive Insight:
CEO Marvin Ellison said during a Tuesday earnings call that the weather, the housing market, and inflation — which continues to depress discretionary spending — remain perennial pressures on retail’s home improvement sector.
While unsurprising that Lowe’s saw sales slip, the decline “is much sharper than that posted by rival Home Depot,” Neil Saunders, managing director of GlobalData, said in emailed comments. “It underlines the fact that Lowe’s is being hit much harder by the slowdown in the home improvement market and that it is in a relatively unfavorable position to mitigate the drop in demand.”
Still, Ellison said the company was pleased with how its spring promotion resonated with customers. “The combination of the right brands, compelling offers, strong store execution and more nimble marketing helped us capitalize on this key time of year,” Ellison said.
Lowe’s saw positive comps with its pro customer segment and is seeing the benefits of its investments through increased sales and improved customer engagement. Ellison said pro customers remain more resilient than DIY customers. “Our strategy continues to focus on taking share with the small to medium-sized pros, such as repair and remodeling contractors, property managers and tradespeople,” Ellison said. The company continues investing in the segment by expanding its capability to deliver larger orders to job sites and by opening new Lowe’s pro supply branches nationwide.
TD Cowen analysts led by Max Rakhlenko said in a Tuesday note ahead of the call that Lowe’s “continues to do a nice job growing its pro business and gaining share,” while the ongoing tough backdrop of DIY business likely remains a factor for the medium-term outlook.
Telsey Advisory Group analysts led by Joe Feldman echoed that sentiment in their own note Tuesday, saying Lowe’s should remain a long-term share gainer. The company will also benefit from its multifaceted strategy of focusing on pro customers, enhancing digital, improving installation services, driving localization and elevating its assortment, Telsey’s analysts said.
Despite a stronger focus on pros, Lowe’s is still pursuing DIY customer growth, its executives said. The retailer in January launched a DIY customer-focused loyalty program, MyLowe’s Rewards. And in April, the company began partnering with DoorDash for on-demand deliveries from its footprint of over 1,700 stores.
Bill Boltz, Lowe’s executive vice president of merchandising, said the retailer’s spring promotional strategy “went more local than ever by using weather-triggered digital marketing as the spring season broke across different regions.” Boltz also said during the call that the Q1 promotion featured doorbusters to drive traffic into stores and online with offers for seasonal merchandise like mulch and live plants.
“Winning the customer with these early seasonal purchases is important as they will often come back multiple times throughout the spring for the remainder of their outdoor project needs,” Boltz said.
