S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
In Senegal's capital, Nicaragua is a hot ticket among travel agents as migrants try to reach US
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
In Senegal's capital, Nicaragua is a hot ticket among travel agents as migrants try to reach US
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
In Senegal's capital, Nicaragua is a hot ticket among travel agents as migrants try to reach US
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
Sports analytics may be outnumbered when it comes to artificial intelligence
In Senegal's capital, Nicaragua is a hot ticket among travel agents as migrants try to reach US
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
Head Start preschools aim to fight poverty, but their teachers struggle to make ends meet
Critical asset just had biggest fall on record (Ad)
What to watch for as China's major political meeting of the year gets underway
Chicago 'mansion' tax to fund homeless services stuck in legal limbo while on the ballot

Renovating returns: Lowe's earnings and the DIY dilemma

Lowe's store front with row of green lawnmowers

Key Points

  • Lowe's faced financial challenges despite slightly exceeding EPS predictions, experiencing a revenue drop and a decline in same-store sales.
  • The company revised its fiscal 2023 outlook, adjusting EPS and revenue expectations reflecting market uncertainties.
  • Analysts foresee potential growth for Lowe's despite economic pressures and rising competition in the retail landscape.
  • 5 stocks we like better than Lowe's Companies

The recent third-quarter financial report for Lowe's Companies NYSE: LOW has unfurled a complex web of financial triumphs and challenges. Despite exceeding market projections, Lowe's faced a drop in total revenues, starkly contrasting with anticipated figures. This stumble was magnified by a startling decline in U.S. same-store sales, catching analysts off guard.

These abrupt declines are intertwined with a shift in consumer behavior. This change in consumer behavior is a blend of economic and homeowner preferences changes. High mortgage rates have doused prospective home buyers' fire, stifling home improvement investments. While Lowe's caters to professional contractors and DIY enthusiasts, the latter significantly contributes to its revenue stream. However, the retail sector as a whole has experienced an unexpectedly sharp reduction in spending, rattling Lowe's quarterly performance as well as the performance of many of its peers.

Drilling into financial figures

Lowe's earnings per share (EPS) for the quarter tallied at $3.06, slightly exceeding the market's predictions. Despite this, the celebrations were short-lived due to a significant 12.8% plunge in total revenues, which settled at $20.47 billion, substantially below the projected figures. Moreover, the U.S. same-store sales sustained a sharp 7.4% decline. This steep drop in same-store sales caught many analysts off guard.

This decline is primarily attributed to shifting consumer behaviors influenced by economic fluctuations and evolving homeowner priorities. High mortgage rates have curbed the aspirations of many Americans to move houses, limiting their ability to invest in home improvements or renovations. While Lowe's caters to both the professional contractor segment and the do-it-yourself (DIY) consumers, the latter accounts for a substantial portion of its revenue. However, this segment experienced a greater-than-expected reduction in spending, significantly impacting Lowe's quarterly performance.

Reassessing the path ahead

In response to the challenging market conditions, Lowe's revised its full-year outlook for fiscal 2023. The EPS projection was adjusted downward to $13.00 from the earlier range of $13.20 to $13.60, indicating a more conservative stance amidst uncertainties. Furthermore, the revenue forecasts experienced a significant reduction, now projected at $86 billion, compared to the previously optimistic estimates ranging from $87 billion to $89 billion. The predicted same-store sales slump of around 5% is a deviation from the initial projection of a milder 2% to 4% decline, underscoring the company's efforts to adapt to the evolving market landscape.


Benchmarking amidst rivals

If we take a wider view of the retail sector, it's clear that Lowe's isn't alone in its challenges. Companies like Home Depot NYSE: HD also encounter similar obstacles. Home Depot, one of Lowe's main competitors in the home improvement retail sphere, managed to perform better than people expected in selling items related to home improvement.

This comparison sheds light on the distinct approaches and strategies these two retail giants adopt when navigating tough market times. Despite operating in the same industry, their methods, adaptations, and resilience to market shifts set them apart. While both companies work in the same space, they tackle problems and adapt uniquely.

The CEO's vision for navigating the storm

Marvin Ellison, CEO of Lowe's, acknowledged the notable decline in discretionary spending for DIY projects, a vital revenue driver for the company. Despite these challenges, Ellison reaffirmed Lowe's commitment to elevating customer experiences. The company's strategic thrust toward providing value and convenience, especially during the upcoming holiday season, aims to foster customer loyalty amid tightened consumer budgets.

Interpreting investor sentiment via market response

Lowe's stock price fell after the company released its earnings report. This was in line with broader industry trends, as other home improvement retailers also saw their stock prices decline. The decline reflects investor concerns about the outlook for the home improvement sector due to factors such as rising interest rates and inflation. These factors are making it more expensive for homeowners to afford home improvement projects, putting pressure on demand for Lowe's products and services.

In addition to the stock market reaction, Lowe's also saw a decline in consumer confidence. According to a recent survey, many homeowners plan to delay or cancel home improvement projects in the next year due to rising costs. This is a reflection of the broader economic slowdown, which is making it more difficult for consumers to afford discretionary spending.

Understanding industry analysis

Despite the immediate decline in revenue, analysts remain cautiously optimistic about Lowe's long-term growth prospects. Several factors support this view, including the company's strong brand reputation, its extensive network of stores, and its growing focus on the professional contractor segment.

Analysts point to Lowe's investments in digital technologies and omnichannel retailing as key drivers of future growth. These investments are expected to enhance the customer experience, improve operational efficiency, and expand Lowe's reach to a wider customer base.

However, analysts also acknowledge Lowe's challenges in the current economic environment. Rising interest rates and inflation are putting pressure on consumer spending, and the company faces increased competition from traditional and online retailers.

While unsettling, Lowe's recent financial headwinds mirror the changing consumer preferences within the home improvement landscape. As Lowe's recalibrates its strategies to align with evolving market demands, the industry watches closely, observing the company's trajectory and the evolving shape of the sector.

→ This is the #1 Stock to Buy for the AI Tidal Wave (From Chaikin Analytics) (Ad)

Should you invest $1,000 in Lowe's Companies right now?

Before you consider Lowe's Companies, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Lowe's Companies wasn't on the list.

While Lowe's Companies currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

10 Best Stocks to Own in 2024 Cover

Click the link below and we'll send you MarketBeat's list of the 10 best stocks to own in 2024 and why they should be in your portfolio.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Lowe's Companies (LOW)
4.5559 of 5 stars
$244.69+1.7%1.80%18.59Moderate Buy$248.67
Home Depot (HD)
4.5428 of 5 stars
$384.45+1.0%2.17%25.46Moderate Buy$363.71
Compare These Stocks  Add These Stocks to My Watchlist 

Jeffrey Neal Johnson

About Jeffrey Neal Johnson

  • jeffrey.neal.johnson@gmail.com

Contributing Author

Retail and Technology Stocks

Experience

Jeffrey Neal Johnson has been a contributing writer for MarketBeat since 2023.

Areas of Expertise

Technology, cryptocurrency, biotechnology, defense sector, automotive industry, hospitality sector

Education

Associate of Arts in Business Development

Past Experience

Strategic business development and ventures 


Featured Articles and Offers

Search Headlines: