Lowe's Q1 revenue of $22.35 billion, full-year guidance weak

Lowe's, the second-largest home improvement retailer in the United States, cut its sales and profit forecasts for this year on Tuesday, citing falling lumber prices, poor weather and fewer discretionary items purchased by DIY customers.

However, the company's shares closed up nearly 2% on Tuesday as its first-quarter revenue and earnings both beat Wall Street expectations.

Lowe's Chief Executive Officer Marvin Ellison said on an earnings call that he expects "consumer spending on discretionary items to pull back in the near term." However, he said Lowe's is in a better position than other retailers. In the first quarter, two-thirds of its sales came from discretionary categories, such as appliances.

The financial report showed that the company's revenue in the first quarter was US$22.35 billion, down nearly 6% year-on-year, but exceeding market expectations of US$21.6 billion; net profit was US$2.26 billion, compared with US$2.33 billion in the same period last year; diluted earnings per share were US$3.77, compared with US$3.51 in the same period last year; adjusted earnings per share were US$3.67, exceeding market expectations of US$3.44.

However, Lowe's same-store sales fell 4.3% in the first quarter, wider than Wall Street's expectations for a 3.4% decline.

Lowe's is the latest retailer to warn of slower sales ahead, as other retailers including Walmart, Target and Home Depot have previously reported slower purchases in essential categories as consumers become more frugal due to cost-of-living pressures.

Looking ahead, Lowe's said it expects total sales for the full year to be between $87 billion and $89 billion, down from its previous forecast of $88 billion to $90 billion. It expects same-store sales to fall 2% to 4%, down from its previous range of being flat to down 2%. Adjusted earnings per share will be between $13.20 and $13.60, down from the previous range of $13.60 to $14.00.

Last week, Lowe's rival Home Depot reported weaker-than-expected first-quarter revenue. The company missed sales expectations for the second straight quarter and cut its full-year guidance as consumers forgo big-ticket items like grills in favor of smaller, less expensive home products.

And, like Lowe's, Home Depot attributed the sales decline to cold, wet weather in the Western United States and falling lumber prices.

Marvin Ellison also said that online sales in the first quarter of 2023 increased 6% compared with the same period last year as more home improvement professionals chose to shop on Lowe's website. He expects sales from home improvement professionals to exceed DIY shoppers for the rest of the year.

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