Lowe’s First Quarter Results Come in Better Than Feared

By Brian Nelson, CFA

On May 21, Lowe’s (LOW) reported better-than-expected first quarter results for the period ended May 3, 2024, that showed a revenue decline of ~4.4%, but not one that was as great as feared. Comparable store sales fell 4.1% in the quarter, but this performance also came in better than the consensus forecast that expected a ~5.6% decline. Diluted earnings per share came in at $3.06 in the quarter versus adjusted diluted earnings per share of $3.67 last year.

Management commentary was upbeat in the press release:

We are pleased with our start to spring, driven by strong execution and enhanced customer service. 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.

Lowe’s continues to navigate a post-pandemic market environment and a relatively stagnant housing market. Comparable store sales were impacted by sluggish Do-It-Yourself [DIY] big ticket discretionary purchases, but strength was evident in sales in Pro and online. During the quarter, Lowe’s continued to return cash to shareholders, repurchasing 3 million shares and paying $633 million in dividends. 

ESG Matters

Image Source: Lowe’s

Lowe’s has a 60-page Corporate Responsibility report where the company has laid out its ESG initiatives. Some of the highlights include reaching “net-zero emissions across the company’s scope 1, 2, and 3 greenhouse gas emissions by 2050.” By 2025, management is targeting 100% of its wood products to be responsibly sourced, and by 2030 Lowe’s expects 50% renewable energy for Lowe’s facilities. The company is also active in the communities it serves, investing “more than $400 million in local communities since 2018.” The company is also big on safety, with its “lost time incident rate (LTIR) falling to 1.78 in 2022 from 2.21 in 2021. Lowe’s also has a diverse board “with 42% identifying as people of color and 33% identifying as women.”

Reaffirmation of 2024 Outlook 

Looking to the full year, management reaffirmed its outlook and expects total sales of $84-$85 billion, roughly in line with consensus, and comparable store sales to be down -2% to -3% compared to the prior year, implying that comp performance should improve during the back half of 2024. Its operating margin for the year is targeted in the range of 12.6%-12.7%, while diluted earnings per share is targeted in the range of $12.00-$12.30, implying shares are trading at ~18.3x earnings at the high end of the guided range.

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