Lowe's Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States. The company offers a line of products for construction, maintenance, repair, remodeling, and decorating.
Lowe’s (LOW) reported mixed third-quarter results that outperformed expectations for comparable sales but revealed continued pressures on margins and discretionary spending. Shares rose 1.45% as analysts maintained cautious optimism about the company’s longer-term prospects, particularly its investments in professional (Pro) customers and e-commerce.
Comparable sales declined 1.1%, better than the forecasted 2.7% drop, supported by high-single-digit growth in Pro sales and a 6% rise in online sales. Seasonal and outdoor categories benefitted from unseasonably warm weather and storm-related activity, contributing a 100-basis-point boost to sales. However, discretionary big-ticket DIY categories, such as kitchen and bath, remained weak, reflecting broader consumer hesitancy amidst inflationary pressures and subdued housing activity.
Margins were stable but pressured. Gross margin held steady at 33.7%, matching the prior year, but operating margin declined to 12.6%, impacted by storm-related supply-chain costs. SG&A expenses rose to 19% of revenue, up from 18.4% the previous year, reflecting increased investments and higher operational costs. EPS came in at $2.99, slightly below last year’s $3.06, despite net sales of $20.17 billion beating estimates of $19.93 billion.
Lowe’s raised its full-year sales guidance to $83.0–$83.5 billion, reflecting improved Q3 performance. The company also narrowed its adjusted EPS forecast to $11.80–$11.90, supported by lower interest expenses but tempered by slightly reduced margin expectations.
Analysts acknowledged Lowe’s strong Pro segment performance and its ability to clear sales hurdles, but many remain cautious about its near-term outlook. While discretionary demand remains muted, Lowe’s is well-positioned to benefit from a potential rebound in the US home improvement market in 2025, driven by aging housing stock and strong homeowner equity.
Overall, Lowe’s strategic focus on Pro customers, e-commerce, and small-ticket DIY projects continues to yield results. However, sustained growth will depend on its ability to navigate headwinds in discretionary spending and maintain margin stability amidst ongoing economic uncertainty. The company’s robust valuation and limited near-term visibility suggest modest gains for investors in the coming quarters. LOW’s inclusion in the US Growth portfolio will next be assessed on December 2nd 2024, and these results are unlikely to see the stock removed from the portfolio as part of that rebalance.
