Home » Lowe’s sees steeper drop in annual sales as DIY demand stumbles

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

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A Lowe’s retail store in Carlsbad, Calif., on May 24, 2017.MIKE BLAKE/Reuters

Lowe’s Cos LOW-N 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 per cent 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 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 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.

In contrast, rival Home Depot’s HD-N 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.

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

“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 per cent, compared with its prior outlook for a 2 per cent to 4 per cent drop. Analysts on average expect a 3.4 per cent drop.

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