Lowe’s Beats Revenue Expectations Despite Declining Sales

Shares of Lowe’s have seen an uptick following the release of its fourth-quarter report, surpassing revenue estimates with $18.60 billion in revenue compared to the expected $18.45 billion. However, the company experienced a 6.2% decrease in comparable sales year-over-year, attributing it to a drop in consumer home renovation projects.

D.A. Davidson Managing Director and Senior Research Analyst Michael Baker recently discussed Lowe’s earnings and the decline in interest in home renovation projects. Despite challenges, Baker noted that Lowe’s managed its expenses effectively, keeping them flat year-over-year relative to sales, even amid a significant decline in sales. This ability to control costs and maintain slightly increased gross margins amidst a tough market environment is seen as a positive sign.

Looking ahead, Lowe’s anticipates a lower performance in 2024 compared to 2023, which was in line with expectations. While the outlook for recovery remains cautious, analysts suggest that improvements may not be seen until the second half of 2024, with a potential positive shift not expected until early 2025.

In terms of market positioning, Lowe’s is working on refining its total home strategy, aiming to bolster its pro-business segment where it still lags behind competitors like Home Depot. Despite challenges, Lowe’s has managed to maintain its market valuation at an average level compared to historical trends, with analysts viewing the current valuation as modest.

Overall, while Lowe’s faces headwinds in the home improvement market, its ability to navigate challenges and control expenses suggests resilience. As the company continues to focus on its total home strategy and address areas for improvement, investors remain cautiously optimistic about its future performance.

“It wasn’t a bad quarter at all,” Baker said. “As it relates to the outlook next year, we knew they’d guide to a lower number in 2024 than in 2023. It was a little bit softer than expected, but not too bad at all. We think they’re doing well internally against a tough macro backdrop.” He added, “We’re seeing the company control what they can pretty well.”