Lowe's sees steeper drop in annual sales as DIY demand stumbles

Inflation stalling home improvement projects

Lowe's Cos on Tuesday projected a bigger drop in annual same-store sales than previously expected, as inflation-hit consumers cut back spending on home-improvement projects, hitting the company's key do-it-yourself (DIY) business segment.

Shares fell about 4% in premarket trading as the demand slump also prompted the company to trim its annual earnings target, even as easing supply chain costs led to a third-quarter profit beat.

Lowe's

HOUSING WATCH: IS NOW A GOOD TIME TO BUY A HOME?

Lowe's saw a "greater-than-expected pullback in DIY discretionary spending, particularly in bigger ticket categories" in the third quarter, CEO Marvin Ellison said.

Lowe's CEO

Lowe's CEO Marvin Ellison participates in a panel discussion during the Milken Institute Global Conference in Beverly Hills, California, on May 2, 2022. (Lauren Justice/Bloomberg via Getty Images / Getty Images)

Lowe's reliance on DIY customers to drive its revenue makes it more susceptible to an uncertain economy, which is prompting consumers to go slow on big home remodeling and discretionary projects.

MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU

In contrast, rival Home Depot's bigger customer base of builders and contractors helped the retailer ride out the weakness in DIY spending and beat expectations for quarterly revenue and profit.

Ticker Security Last Change Change %
HD THE HOME DEPOT INC. 359.77 +5.98 +1.69%

Lowe's reported a 7.4% drop in same-store sales for the three months ended Nov. 3, compared with analysts' average estimate of a 5% drop, according to LSEG IBES data.

AMERICAN FAMILIES INCREASINGLY BELIEVE THE AMERICAN DREAM IS OUT OF REACH

"It is a little surprising that Lowe's lowered its guidance ... there may be an element of conservatism in there, but there also may be an element that (Lowe's is) just not seeing the discretionary customer come back like (it) originally anticipated," said M Science analyst John Tomlinson.

Lowe's now expects full-year comparable sales to decline 5%, compared with its prior outlook for a 2% to 4% drop. Analysts on average expect a 3.4% drop.

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Full-year per-share profit is now expected to be $13, down from a range of $13.20 to $13.60 estimated previously.