Lowe’s Raises Forecast Despite Slowdown in Pandemic DIY Boom
(Bloomberg) -- Lowe’s Cos. Inc. surged after raising its full-year forecast beat Wall Street’s quarterly sales expectations, a sign that its professional business is helping counter a slowdown in demand from the do-it-yourself customers that fueled last year’s early-pandemic boom.
The home-improvement retailer expects revenue of about $92 billion this year, Lowe’s said Wednesday in a statement. That’s ahead of a previous “robust market scenario” that assumed sales of about $86 billion.
The “encouraging” outlook reflects strong trends in August and better-than-expected discipline on costs, Jonathan Matuszewski, retail analyst at Jefferies, said in a note.
The shares jumped 7.9% to $196.68 at 9:44 a.m. in New York.
Investors have been bracing for a possible slowdown after the pandemic last year drove strong demand for everything from groceries to home goods to building supplies, particularly from customers tackling DIY projects. Lowe’s chief rival, Home Depot Inc., disappointed investors this week with weaker-than-expected results.
While Lowe’s same-store sales, a key metric in retail, fell 1.6% in the period ended July 30, that was better than a predicted decline of 1.9%, according to the average of analyst estimates compiled by Bloomberg. Adjusted earnings of $4.25 a share also topped expectations.
“We know there are uncertain times that remain out there but we are very optimistic on the short- and long-term outlook for Lowe’s,” Chief Executive Officer Marvin Ellison said in an interview. “We believe that the pandemic has permanently shifted how we feel about the home.”
So far in August, Lowe’s said it has seen strong sales trends. Analysts have said Lowe’s business might be more vulnerable than Home Depot to any slowdown in the DIY craze because a larger portion of its business comes from the segment. The retailer has been investing in building out its pro business, such as launching a loyalty program and increasing staffing services for contractors, but it still lags behind Home Depot. Ellison pointed to the 21% growth in its pro segment.
Similar to Home Depot, Lowe’s pro business sales outpaced its DIY unit in the quarter. That transition began in the first quarter, but was even more exaggerated in the period just ended, Ellison said.
“We’ve been focused on the pro customer and that focus is starting to pay dividends,” Ellison said. “We think that that’s going to be the shift for the balance of the year.”
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