8-K: Lowe's Reports Q1 2024 Results: Sales Decline, EPS Down, But Full-Year Outlook Affirmed

Lowe's reported a decrease in comparable sales and diluted earnings per share for the first quarter of 2024, while affirming its full-year outlook.

Summary

• Lowe's reported net earnings of $1.8 billion and diluted earnings per share (EPS) of $3.06 for the first quarter ended May 3, 2024.
• This compares to a diluted EPS of $3.77 in the first quarter of 2023, which included a gain from the sale of the Canadian retail business; excluding this gain, the adjusted diluted EPS for Q1 2023 was $3.67.
• Total sales for the quarter were $21.4 billion, down from $22.3 billion in the same quarter last year.
• Comparable sales decreased by 4.1%, with a decline in DIY big ticket discretionary spending partially offset by positive comparable sales in Pro and online.
• The company repurchased approximately 3.0 million shares for $743 million and paid $633 million in dividends during the quarter.
• Lowe's is affirming its full-year 2024 outlook, projecting total sales of $84 to $85 billion and comparable sales to be down 2 to 3% compared to the prior year.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the decline in sales and earnings, although the affirmation of the full-year outlook provides some reassurance. The company is facing headwinds in the DIY segment, but is showing some strength in Pro and online.

Positives

• Lowe's saw positive comparable sales in the Pro and online segments, indicating strength in these areas.
• The company is affirming its full-year 2024 outlook, suggesting confidence in its future performance.
• Lowe's returned $1.4 billion to shareholders through dividends and share repurchases.
• The company rolled out a new DIY loyalty program nationally and expanded same-day delivery options.
• Lowe's took market share in key categories and continues to gain momentum with its Total Home strategy.

Negatives

• Comparable sales decreased by 4.1% overall, driven by a decline in DIY big ticket discretionary spending.
• Diluted EPS decreased to $3.06 from $3.77 in the same quarter last year, or $3.67 adjusted for a gain from the sale of the Canadian retail business.
• Total sales decreased from $22.3 billion to $21.4 billion year-over-year.
• Gross margin decreased by 49 basis points to 33.2%.
• Operating margin decreased by 229 basis points to 12.4%.

Risks

• The company faces risks related to changes in general economic conditions, including inflation and consumer spending.
• Fluctuations in interest rates and currency could impact the company's financial performance.
• The housing market and home improvement industry are subject to various risks, including changes in home prices and consumer credit availability.
• Trade policy changes, tariffs, and geopolitical conflicts could negatively affect the company's operations.
• Pandemics and natural disasters pose potential risks to the company's supply chain and operations.

Future Outlook

Lowe's is affirming its full-year 2024 outlook, projecting total sales of $84 to $85 billion, comparable sales down 2 to 3%, operating margin of 12.6% to 12.7%, interest expense of approximately $1.4 billion, an effective income tax rate of approximately 25%, diluted earnings per share of approximately $12.00 to $12.30, and capital expenditures of approximately $2 billion.

Management Comments

• We are pleased with our start to spring, driven by strong execution and enhanced customer service, said Marvin R. Ellison, Lowe's chairman, president and CEO.
• This quarter we rolled out our new DIY loyalty program nationally, expanded same-day delivery options and took market share in key categories.
• We continue to gain momentum with our Total Home strategy, reflected in our growth in Pro and online.
• I would like to thank our frontline associates for their hard work, commitment to customers and disciplined focus on productivity.

Industry Context

The results reflect a broader trend in the home improvement sector where DIY spending is softening while Pro and online sales remain relatively strong. This is likely due to a combination of factors including inflation, interest rates, and a shift in consumer spending habits.

Comparison to Industry Standards

• Lowe's comparable sales decline of 4.1% is worse than Home Depot's reported 2.8% decline in comparable sales for the same period, indicating a potential underperformance relative to its main competitor.
• While both companies are experiencing a slowdown in DIY spending, Lowe's appears to be more impacted by this trend.
• Home Depot's operating margin of 14.8% is higher than Lowe's 12.4%, suggesting that Home Depot is more efficient in managing its costs.
• Both companies are focusing on growing their Pro and online businesses, which are seen as key growth drivers in the current market environment.
• Lowe's is investing in its Total Home strategy, which is similar to Home Depot's focus on providing a comprehensive suite of products and services for both DIY and Pro customers.

Stakeholder Impact

• Shareholders may be concerned about the decrease in sales and earnings, but the affirmation of the full-year outlook may provide some comfort.
• Employees are acknowledged for their hard work and commitment, which is positive for morale.
• Customers will benefit from the new DIY loyalty program and expanded same-day delivery options.
• Suppliers may be impacted by the changes in sales volume and product mix.
• Creditors will be monitoring the company's financial performance and ability to meet its obligations.

Next Steps

• Lowe's will hold a conference call on May 21, 2024, at 9 a.m. ET to discuss the first quarter 2024 operating results.
• The company will continue to execute its Total Home strategy and focus on growing its Pro and online businesses.

Key Dates

Keywords

home improvement, retail, sales, earnings, DIY, Pro, online, comparable sales, EPS, share repurchases, dividends, Total Home strategy