An employee organizes buckets for sale at a Lowe’s Cos. Store in Burbank, California.
Patrick T. Fallon | Bloomberg | Getty Images
Lowes The sales outlook disappointed investors on Wednesday, voicing concerns that the pandemic-induced boom in home improvement and decoration projects is cooling.
In pre-market trading, the company’s share even lost up to 4%. Then the stock rose slightly later on Wednesday morning as new data from home builders showed a great appetite for housing – even during a normally weak season and a period of inflation. That backdrop, coupled with Lowe’s comments about the possibility of market share gains, is helping the stock bounce back.
During an analyst meeting, Chief Financial Officer Dave Denton said the retailer expects its sales to outperform competitors and attract more home improvement deals. Still, he acknowledged that Lowe’s is preparing for a “modest sector retreat in 2022,” compared to a year of such high demand and sales, fueled by government incentives.
The company forecast that sales in the same business in fiscal 2022 could decrease or stay about the same by up to 3% compared to that fiscal year. Total sales in the same business for the coming year will be between $ 94 billion and $ 97 billion. According to Refinitiv, this was below analyst estimates of $ 97.64 billion.
Lowe’s estimates total sales for this fiscal year at approximately $ 95 billion, which is a week shorter than the next fiscal year.
For fiscal 2022, Lowe’s expects earnings between $ 12.25 and $ 13.00 per share. On average, according to Refinitiv, analysts expected Lowe to make $ 12.93 per share.
CEO Marvin Ellison said the company can continue to grow by introducing new private label brands, expanding and closing its e-commerce business a one stop shop for supplies that help the elderly grow older in their own home. For example, he said that it will debut a modern decor brand called Origin 21. He said it is expediting shipments of large and bulky purchases like home appliances with a new pilot in Florida and Ohio. This more efficient process increases bottom line and customer satisfaction, he said.
Together, he said, these efforts will “expand our share of the wallet for both home improvement and professional customers”.
Ellison said the retailer will also benefit from a favorable environment, including more cash in consumer savings accounts, historically low interest rates, rising home values and an aging US home inventory. About two-thirds of the company’s sales come from repairs and maintenance, he said.
Also, Ellison said the pandemic has inspired people to invest more in their homes, from millennials first buying homes to baby boomers adapting older homes.
“There has been a longer term shift in the way consumers think about the importance of home ownership,” he said. “Our view of home is a haven that may have to serve several different purposes: residence, office, school, gym, and a meeting place for indoor and outdoor entertainment. And given the expansion of remote work, we expect a permanent increase in the repair and maintenance cycle. “
Regardless, the company announced that it plans to buy back approximately $ 12 billion worth of shares both this year and next.
At the close of trading on Tuesday, Lowe’s shares were up 57% in 2021. The stock closed Tuesday, down $ 252.46 1.86%. The company’s market value is $ 170.10 billion.