Lowe’s outpaced earnings estimates on Wednesday, as sales of home decor and the growth of its home installations and professional business helped drive sales in the second quarter.
Shares rose more than 4.5% in premarket trading.
CEO Marvin Ellison said demand for kitchen, bath, flooring and appliances remains strong, but the home improvement retailer has noticed a shift in its business. He said more customers are shopping on weekdays, as they spend weekends on vacations, at parks or at social events again.
Still, he said he remains confident that people will continue to spend on their homes — especially since many now have bigger houses or larger yards. Some have taken advantage of low interest rates to purchase a bigger home or expand the one they own. They’ve added more space to work remotely, or finally tackled a renovation project after seeing home values rise.
“The pandemic has created a long-term impact of the home’s importance, and we just don’t see that changing,” he said.
Here’s what the company reported for the fiscal second quarter ended July 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $4.25 vs. $4.01 expected
- Revenue: $27.57 billion vs. $26.85 billion expected
Lowe’s profits rose to $3.02 billion, or $4.25 per share, from $2.83 billion, or $3.74 per share, a year earlier. The results outpaced the $4.01 per share expected by analysts surveyed by Refinitiv.
Net sales climbed to $27.57 billion from $27.30 billion last year and were higher than analysts’ expectations of $26.85 billion.
The home improvement retailer has reported quarter after quarter of eye-popping growth. However, that has teed up an almost inevitable decline of sales growth as consumers reemerge into the world and can choose to spend money in other ways, from booking vacations to planning parties.
Lowe’s same-store sales dropped by 1.6% in the quarter — marking the first time the key retail metric declined in more than eight years. That was a slightly stronger performance than expected, since analysts had predicted a 2.2% decline, according to StreetAccount. U.S. same-store sales fell 2.2%, but grew by 32% when looking over a two-year period.
During the year-ago period, Lowe’s put up big numbers, including 35.1% same-store sales growth and a nearly 69% surge in quarterly profits.
Ellison said Lowe’s still sees growth opportunities. He said it will increase e-commerce sales, expand its offering of turnkey installation services, add private brands and tailor its assortment of merchandise to feel local at different kinds of stores.
Lowe’s has historically drawn more of its business from do-it-yourself customers, but it’s trying to attract home professionals with a new loyalty program and other perks. About 20% to 25% of its total sales have come from contractors, electricians, plumbers and other pros versus about 45% at rival Home Depot. The home pros tend to be more frequent visitors and bigger spenders.
Lowe’s CEO Marvin Ellison said the company’s home professional business grew by 21% and home installation grew 10% in the second quarter.
The company said strong sales trends continued into August.
Lowe’s expects revenue of about $92 billion this year, saying that represents 30% same-store sales growth on a two-year basis. It also said it plans to buy back at least $9 billion of its stock.
Ellison, who is leading the company’s turnaround, said Lowe’s will continue to focus on driving higher profits through higher productivity.
In its earnings report a day earlier, rival Home Depot fell short of expectations for same-store sales in the fiscal second quarter, as some customers’ appetite for do-it-yourself projects faded. The company also declined to provide an outlook for the year, citing uncertainty about factors from supply-chain headaches to the delta variant’s influence on consumer spending. Its shares closed down 4.27% to $320.75 on Tuesday.
Lowe’s shares closed down 5.8% to $182.26 on Tuesday after Home Depot’s earnings report. They’re up about 14% this year.
Read the company’s press release here.
Correction: An earlier headline misstated same-store sales growth. Same-store sales fell 1.6% in the quarter.