Lowe’s Cos. shares rose after the company reported gains among professional contractors and a drop in comparable sales that was less than that of its main rival, Home Depot Inc.
Comparable sales, a key measure of retail performance, dropped 4.3% at Lowe’s in the first quarter. While that was more than expected, it was still less than the drop posted by Home Depot over the same period. DA Davidson analysts led by Michael Baker noted that it was the first time Lowe’s comparable sales were better than Home Depot’s since the end of 2020.
The company remains “optimistic about the medium-to-long term outlook for home improvement,” according to Chief Executive Officer Marvin Ellison. He said that while sales from do-it-yourself customers were pressured in the first quarter, comparable sales from contractors were “slightly positive.” That points to project backlogs and the success of Lowe’s loyalty program for professionals.
Lowe’s reduced its outlook for the full fiscal year, now expecting comparable sales to drop as much as 4%. In March, Lowe’s predicted sales by that measure might be flat or decline as much as 2%.
Lowe’s blamed falling lumber prices, unfavorable weather and lower spending on DIY and other discretionary items for declining sales. Home Depot last week also cut its full-year outlook and noted a “broad-based pullback” among consumers. DA Davidson’s Baker wrote that Lowe’s reduction in guidance “was probably not a surprise.”
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Lowe’s shares rose 2.7% as of 10:26 a.m. in New York. The stock has gained about 4.8% in 2023, trailing the advance of the S&P 500 Index.
Analysts at TD Cowen were “encouraged” by positive professional comparable sales, and noted that Lowe’s “continues to take share with small pros.” That said, they estimate continued softness for do-it-yourself customers over the coming quarters.
Economic uncertainty has led consumers to tighten their budgets and curb spending on discretionary items like home goods and apparel. Meanwhile, colder-than-usual weather in the early part of the year delayed home-improvement projects that Lowe’s typically expects during the period.
