By Deborah Mary Sophia
(Reuters) – Lowe’s Cos on Tuesday projected a bigger drop in annual same-store sales than previously expected, as inflation-hit consumers cut back spending on home-improvement projects, hitting the company’s key do-it-yourself (DIY) business segment.
Shares fell about 3% as the demand slump also prompted the company to trim its annual earnings target, even as easing supply chain costs led to a third-quarter profit beat.
Lowe’s saw a “greater-than-expected pullback in DIY discretionary spending, particularly in bigger ticket categories” in the third quarter, CEO Marvin Ellison said.
The company’s reliance on DIY customers to drive its revenue makes it more susceptible to an uncertain economy, which is prompting consumers to go slow on big home remodeling and discretionary projects.
In contrast, rival Home Depot’s bigger customer base of builders and contractors helped the retailer ride out the weakness in DIY spending and beat expectations for quarterly results.
Lowe’s reported a 7.4% drop in same-store sales for the three months ended Nov. 3, compared with analysts’ estimates of a 5% drop, according to LSEG IBES data.
The company called out categories such as appliances, home decor and flooring as areas where it saw increased pressure on big-ticket sales, with consumers even postponing some purchases.
“While we’ve seen a more cautious consumer for some time now, this quarter, we saw some of these consumers increasingly prioritizing experiences over goods, spending on travel and entertainment,” the CEO said on a post-earnings call.
Lowe’s expects full-year comparable sales to decline 5%, compared with its prior outlook for a 2% to 4% drop. Analysts on average expect a 3.4% drop.
“There may be an element of conservatism in there, but there also may be an element that (Lowe’s is) just not seeing the discretionary customer come back like (it) originally anticipated,” M Science analyst John Tomlinson said.
(Reporting by Deborah Sophia in Bengaluru; Editing by Anil D’Silva)