Lowe's (LOW) customers continued to cut back on spending this quarter.
On Tuesday morning, the home improvement giant reported sales of $21.36 billion, beating Wall Street's expectations of $21.13 billion. Same-store sales fell 4.1%, slightly better than the 4.3% decline in the first quarter of last year.
The company signaled a decline in general customers buying higher-priced items, but said this was “partially offset by strong same-store sales in Pro and online.”
Chief Executive Marvin Ellison said the company adjusted its strategy “to capture early spring customers” and “performed well in a challenging home improvement environment.”
He added that “strong execution and enhanced customer service” helped drive first-quarter results as the company rolled out its DIY loyalty program nationwide and expanded same-day delivery with partners like DoorDash (DASH).
Lowe's investment in its total home strategy, aimed at offering a broader range of products to DIYers and professionals, is “reflected in the growth in pro and online,” he said.
Adjusted earnings per share were $3.06, beating the $2.95 expected but down from $3.67 a year ago.
Joe Feldman of Telsey Advisory Group maintained his firm's “hold” rating on Lowe's in a client note.
“The industry continues to face headwinds due to weak housing market trends, consumer spending caution, especially on big ticket items and projects, and continued normalization from the pandemic-related gains of the past four years,” he said.
Existing home sales fell 4.3% in March.
“Consumers continue to digest and adapt to the tightening credit,” Chief Financial Officer Brandon Sink said on a conference call with investors, adding that the company is waiting for a catalyst as consumers “remain on the sidelines in some ways.”
Ellison said the company is ready to “take full advantage” if positive trends emerge again.
Like Home Depot (HD), Lowe's could grow sales by focusing on serving pros like roofers and builders. Feldman also cited “strengthening digital, improving installation services, increasing localization and expanding product assortment” as possible ways to grow.
In Home Depot's most recent earnings call, executives cited a shift in consumer spending toward services, a sluggish housing market due to rising mortgage rates and a delayed spring selling season caused by cold, wet weather as headwinds.
Billy Bastek, Home Depot's head of merchandising, said the company has seen a decline in large DIY projects “such as kitchen and bathroom remodels, where customers often use loans to fund their projects.”
DIY consumers make up roughly 75% of Lowe's shopper base, compared with just 25% at Home Depot.
Lowe's shares are up 2% so far this year, lagging behind the S&P 500's (^GSPC) 11% gain.
Here's how Lowe's reported compared with Wall Street expectations, according to Bloomberg consensus.
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Revenue: $21.36 billion vs. $21.13 billion
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Adjusted earnings per share: $3.06 vs $2.95
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Same-store sales growth: -4.10 vs -5.64%
The company reaffirmed its 2024 outlook.
The company expects total sales of $84 billion to $85 billion for the current fiscal year, but same-store sales are expected to fall 2% to 3% from last year.
Ellison pointed to consumers being hit by “slashing interest rates” and “persistent inflationary pressures,” and said they are still choosing experiences over home improvements.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter.Brooke DiPalma Or email me at bdipalma@yahoofinance.com
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