Lowe’s Lowers Full Year 2024 Outlook on Weak DIY Sales

Image: Lowe’s shares have traded sideways since the beginning of 2022.

By Brian Nelson, CFA

On August 20, Lowe’s (LOW) reported mixed second quarter results with revenue coming in below expectations and the firm’s non-GAAP earnings per share exceeding the consensus forecast. Total sales during the quarter fell 5.5%, while comparable sales for the quarter fell 5.1% “driven by continued pressure in DIY (do-it-yourself) bigger ticket discretionary spending and unfavorable weather adversely impacting sales in seasonal and other outdoor categories.”

Adjusted diluted earnings per share fell to $4.10 per share in the second quarter from $4.56 per share in the second quarter of 2023. During the second quarter, Lowe’s bought back roughly 4.4 million shares of stock for $1 billion, while it paid $626 million in dividends. Management had the following to say about the second quarter and outlook in the company’s press release:

The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner. At the same time, we continue to build momentum with our Total Home strategy reflected by our mid-single-digit positive comps with the Pro customer this quarter. As we look ahead, we are confident that we are making the right long-term investments to take share when the market recovers. I’d like to extend my appreciation to our dedicated frontline associates who remain committed to serving our customers.

The company’s cash flow from operations advanced to $7.42 billion during the first half of the year from $5.97 billion in the same period of 2023. Capital expenditures totaled $808 million during the first half of the year versus $765 million over the same period last year. Free cash flow came in at $6.6 billion during the first six months of its fiscal year, which was considerably higher than the $1.26 billion it paid as dividends over the same time. The company ended the quarter with $35.9 billion in short- and long-term debt and $4.7 billion in cash and short-term investments.

Lowe’s updated its outlook for full year 2024 to account for “lower than expected DIY sales and a pressured macroeconomic environment.” Total 2024 sales are now expected in the range of $82.7-$83.2 billion (was $84-$85 billion), with comparable store sales expected to be down 3.5%-4% (was -2% to -3%). Adjusted operating income as a percentage of sales is targeted in the range of 12.4%-12.5% (was 12.6%-12.7%). Adjusted diluted earnings per share is expected in the range of $11.70-$11.90 (was $12.00-$12.30). Our $230 fair value estimate of Lowe’s remains unchanged at this time. Shares yield 1.9%.

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