Lowe's merely affirmed its full-year outlook Wednesday after delivering an earnings beat for the first quarter. Lowe's stock tumbled Wednesday.
On Tuesday, Home Depot raised its full-year outlook after posting a surprise Q1 profit, as the Dow Jones home improvement giant weathers cost inflation. Home Depot stock also slid after rising slightly Tuesday.
Spring is typically the strongest season for home improvement retailers. But the retailers faced tough comps and inflationary headwinds this year. Still, Home Depot defied inflation, as well as Wall Street's expectations, to actually grow Q1 same-store sales. Lowe's did not.
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Lowe's Earnings
Early Wednesday, Lowe's disclosed that earnings for the quarter ended April 29 climbed 9% to $3.51 a share, easily beating estimates. Revenue fell 3.1% to $23.66 billion, a slight miss. Comps declined 4%, worse than views, with U.S. same-store sales off 3.8%.
Wall Street had forecast Lowe's earnings of $3.22 per share on revenue of $23.765 billion. Same-store sales were seen falling 2.5% after a 5% gain in the prior holiday quarter, according to FactSet.
Lowe's blamed unseasonably cold weather in April, which hurt demand for supplies for DIY, or do-it-yourself, projects. "Because 75% of our customer base is DIY, our Q1 sales were disproportionately impacted by the cooler spring temperatures," CEO Marvin Ellison said. "Now that spring has finally arrived, we are pleased with the improved sales trends we are seeing in May."
Lowe's maintained guidance for fiscal 2022 EPS of $13.10-$13.60. The $13.50 midpoint is slightly below analysts' views for $13.39, especially given the Q1 beat by 29 cents. The home improvement giant also sees revenue of $97 billion-$99 billion, with the midpoint roughly in line with views for $98.106 billion.
Lowe's Stock
Shares fell 5.3% to 183.79 amid a broad sell-off on the stock market today. Lowe's stock had fallen almost 36% since Dec. 31, trading well below key support levels. Floor & Decor, which modestly beat earnings and sales views May 6, fell 4.2% Wednesday.
Nine analysts cut their price target on LOW stock Wednesday and one analyst hiked, FactSet shows.
Home Depot Earnings
Early Tuesday, Home Depot reported that earnings for the quarter ended May 1 rose 6% to $4.09 a share, beating estimates for a 5% decline. Revenue climbed 3.8% to $38.91 billion, also ahead of views for a 2% fall. Same-store sales rose 2.2%, vs. expectations for a 3% drop, with U.S. comps up 1.7%.
The home improvement giant continues to leverage brick-and-mortar sales while expanding e-commerce sales. More than half of Q1 online orders were fulfilled through a store, it said. In addition, professional sales growth outpaced DIY or consumer sales last quarter.
"The solid performance in the quarter is even more impressive as we were comparing against last year's historic growth and faced a slower start to spring this year," new Home Depot CEO Ted Decker said in an earnings release early Tuesday.
Management said on an earnings call that they haven't seen shoppers pull back, but are monitoring "how inflation might impact consumer behavior going forward," according to CNBC.
For fiscal 2022, Home Depot guided EPS growth in the mid-single-digits with total sales and comps up about 3%. That improves prior guidance for low-single-digits EPS growth and "slightly positive" sales growth. Wall Street had seen Home Depot earnings rising 3.6% and revenue growing 1.8% in 2023.
Home Depot Stock
Shares of Home Depot lost 5.4% to 284.63 Wednesday. Home Depot stock closed up 1.7% Tuesday but met resistance at a falling 50-day moving average. The Dow retail stock is down 30% for the year.
More than a dozen analysts cut their price targets on Home Depot stock after May 17 earnings, according to FactSet. One analyst hiked the PT.
The relative strength line for Home Depot stock is improving after a slide since December 2021.
Inflationary Woes Follow Pandemic Boom
For Home Depot and Lowe's, the pandemic boom in home renovations and spending has eased, while rising interest rates are weighing on the housing sector broadly.
The companies also face shortages of materials and drivers that are driving costs higher.
In 2020 and 2021, consumers stuck at home or moving home spent heavily on renovation projects.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
