Lowes nyse Low Joins Home Depot in Profit Warning As Consumer Spending Dips

Lowe’s (NYSE: LOW) Joins Home Depot in Profit Warning as Consumer Spending Dips

Lowe’s Companies (NYSE: LOW) shares declined in early afternoon trading Tuesday following a downward revision of its full-year profit forecast. The revision is in line with the warning from Home Depot about a significant decrease in consumer spending on big-ticket items leading into the holiday season.

The US-based retail company projects an overall revenue of $86 billion for the current quarter—down from its previous forecast of $87 billion to $89 billion. Same-store sales are expected to decline by around 5%, compared to the initial forecast of a 2% to 4% decline. The company now expects earnings of $13 per share, down from the earlier guidance of $13.20 to $13.60 per share.

However, Lowe’s Companies (NYSE: LOW) reported better-than-expected third-quarter earnings. Adjusted earnings for the three months ending in October came in at $3.07 per share, a 6.1% decrease from last year but ahead of the Street consensus forecast of $3.03 per share.

Group revenues slumped 12.8% to $20.47 billion, missing analysts’ forecast of $20.89 billion. U.S. same-store sales declined 7.4%, compared to the Refinitiv forecast of a 5% decrease.

CEO Marvin Ellison commented on the third-quarter performance, noting,

“In the third quarter, the company delivered strong operating performance and improved customer service despite a greater-than-expected pullback in DIY discretionary spending, particularly in bigger ticket categories.”

Ellison reassures customers of Lowe’s commitment to providing value and convenience during the holiday season. He also expressed gratitude to front-line associates for maintaining excellent customer service.

The news immediately led to a 3.21% drop in Lowe’s shares, reaching $197.87 each in early afternoon trading. This decline erased all gains made by the stock over the past six months.

Meanwhile, Home Depot (NYSE: HD), the leading home improvement retailer, topped Street expectations with earnings of $3.81 per share on revenues of $37.71 billion. However, the company revised its full-year profit forecast downward, citing a consumer retreat from higher-priced items and projects.

Big-ticket sales fell 5.2% year-on-year (YoY), led by declines in flooring, countertops, and cabinets.

Looking ahead to the 2023 fiscal year, Home Depot (NYSE: HD) expects a decline in earnings within a range of 9% and 11%, compared to the earlier forecast of 7% to 13%. In addition, the company expects a drop in comparable sales between 3% and 4%.