US’s Lowe’s cuts full-year outlook as it expects weaker home improvement sales
Source：CNBC
From：Taiwan Trade Center, Los Angeles
Update Time：2024/09/27
Lowe's, a United States home improvement and building materials retailer, cut its full-year sales forecast on Tuesday (8/23) as the retailer's quarterly sales fell and expected home improvement spending in the United States to weaken in the second half of the year.
The company said it now expects its full-year total sales to fall between $82.7 billion and $83.2 billion, down from its previous forecast of $84 billion to $85 billion. Meanwhile, the company expects its same-store sales to fall by 3.5% to 4%, compared to its previous forecast of a decline of 2% to 3%. Lowe's expects adjusted earnings per share to be in the range of $11.70 to $11.90, down from its previous guidance of $12 to $12.30.
In an interview with CNBC, CEO Marvin Ellison said that consumers are waiting for the Federal Reserve to cut interest rates. Shoppers are also under economic pressure from the broader environment, he added. "Inflationary pressures remain significant," he said. "Consumers are waiting for interest rates to fall, and big purchases are being postponed as a result."
Federal Reserve Chair Jerome Powell has hinted at a rate cut as early as September, but Ellison said it's hard to predict when home improvement activity will accelerate again after the rate cut. He said 90 percent of Lowe's customers are homeowners, and most of them have a fixed 30-year mortgage rate of less than 4 percent. This explains why customers are hesitant to apply for a new mortgage at high interest rates or to take out a loan for a large home improvement project. He said Lowe's has not yet seen a "significant change in overall consumer confidence and feelings" but is waiting for home transactions to rise.
About 25 percent of Lowe's sales come from home improvement professionals, compared to about half of Home Depot's. Over the past five years, Lowe's has struggled to attract more home improvement professionals, who are often more stable and profitable customers, by offering custom merchandise, delivering orders to the jobsite, and offering a membership program.
Mr. Ellison said that effort had paid off, with home improvement professionals now being the "strongest part" of our overall business. At a time when investors and economists are closely watching consumer spending, Lowe's shared its quarterly results and outlook. Recent economic data and corporate earnings have given a less consistent signal to the financial health of United States households as the Fed considers a long-awaited rate cut. Job growth in July was much lower than expected.
On the other hand, Walmart's chief financial officer, John David Rainey, told CNBC that the largest retailer in the United States is not seeing a further deterioration in consumer economic conditions. Goldman Sachs also lowered the probability of a recession to 20%.
For home improvement retailers, the pressure is likely to be even greater due to rising mortgage rates and high borrowing costs. Lowe's rival Home Depot reported quarterly earnings and revenues last week that beat Wall Street's expectations. However, the company said it expects the second half of the year to be weaker than expected as consumers continue to adopt a "delay mentality".
In an interview with CNBC, Home Depot's chief financial officer, Richard McPhail, said customers aren't just delaying renovation projects because of rising interest rates. Although most Home Depot customers own properties and property values have risen significantly, they have a "stronger sense of uncertainty" about the economy.
Ellison told CNBC that the outlook for the home improvement industry is bright in the medium to long term. He pointed to aging domestic homes in United States, more millennials starting families, and baby boomers choosing to renovate existing homes rather than move as factors contributing to the growth of the sector. "We're waiting for that inflection point to happen, and when it does, we believe we're in a great position to capture market share."
Source: https://www.cnbc.com/2024/08/20/lowes-low-q2-2024-earnings.html