Lowe’s Stock Is Falling. Solid Earnings Weren’t Enough.

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Lowe’s relies more on do-it-yourselfers than rival Home Depot.

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Lowe’s earnings topped estimates, but that wasn’t enough to help the stock Wednesday morning.

The home improvement retailer reported net earnings of $2.3 billion in the first quarter. On a per-share basis, earnings were $3.51 a share, topping Wall Street forecasts of $3.22.

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The company affirmed its outlook for 2022 revenue of $97 billion to $99 billion, and earnings of $13.10 to $13.60 a share.

Lowe’s (ticker: LOW) shares fell 4.4% in premarket trading Wednesday to $186. Investors are comparing results to Home Depot (HD), which raised its guidance Tuesday after a stronger-than-expected earnings.

Lowe’s total sales in the first quarter were $23.7 billion compared with $24.4 billion a year ago. Comparable sales dropped more than expected, falling 4%, with comparable US sales decreasing 3.8%.

The company expects comparable sales for the year to range from a 1% decline to a 1% increase.

Shares of Lowe’s and Home Depot have fallen this year for two key reasons: the broader market selloff and concerns that consumers are interest in fixing up their homes. And the fear that demand has dropped, or is softening, is justified given the pandemic reopening now solidly underway, red-hot inflation, and rising mortgage rates.

But home improvement has catalysts outside the housing market, which has seen indications of cooling. Those external drivers popped up in Home Depot’s last quarter, with comparable sales rising—despite consensus estimates calling for a small decline—and up on a three-year prependemic basis as well.

MORE ON EARNINGS

And Home Depot’s solid numbers — the chain grappled with supply-chain disruptions and inflation, too, but also defined them — are a big positive for Lowe’s, which has been echoing and, sometimes, outdoing its main competitor’s strength throughout the pandemic.

Still, Home Depot’s professional business was a standout in the quarter—and Lowe’s relies more on do-it-yourself customers. In general, pros are still working through backlogs of projects, while do-it-yourselfers have pulled back because of higher costs. The disparity in consumer types was pronounced Lowe’s results, which showed sales to pro consumers up 20% in the first quarter.

Moreover, Lowe’s foot traffic dipped more than Home Depot’s in March and April, compared with prependemic 2019 readings, according to data for Placer.ai.

Write to Teresa Rivas at [email protected]

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Credit: www.marketwatch.com /

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