Lowe’s earnings beat estimates, as home professionals help drive growth

Lowe’s outpaced earnings estimates on Wednesday, as projects by home professionals helped drive sales in the second quarter.

Shares rose more than 4.5% in premarket trading.

Here’s what the company reported for the fiscal second quarter ended July 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: $4.25 vs. $4.01 expected
• Revenue: $27.57 billion vs. $26.85 billion expected

Lowe’s profits rose to $3.02 billion, or $4.25 per share, from $2.83 billion, or $3.74 per share, a year earlier. The results outpaced the $4.01 per share expected by analysts surveyed by Refinitiv.

Net sales climbed to $27.57 billion from $27.30 billion last year and were higher than analysts’ expectations of $26.85 billion.

The home improvement retailer has reported quarter after quarter of eye-popping growth. However, that has teed up an almost inevitable decline of sales growth as consumers reemerge into the world and can choose to spend money in other ways, from booking vacations to planning parties.

Lowe’s same-store sales, a key retail metric, dropped by 1.6% in the quarter. That was a slightly stronger performance than expected, since analysts had predicted a 2.2% decline, according to StreetAccount. U.S. same-store sales fell 2.2%, but grew by 32% when looking over a two-year period. During the same year-ago period, Lowe’s put up big numbers, including 35.1% growth of same-store sales and a nearly 69% surge in quarterly profits.

Lowe’s has historically drawn more of its business from do-it-yourself customers, but it’s trying to attract home professionals with a new loyalty program and other perks. About 20% to 25% of its total sales have come from contractors, electricians, plumbers and other pros versus about 45% at rival Home Depot. The home pros tend to be more frequent visitors and bigger spenders.

Lowe’s CEO Marvin Ellison said the company’s home professional business grew by 21% in the second quarter. He said home decor sales and a 10% growth of installation services also fueled second-quarter earnings.

The company said strong sales trends continued into August.

Lowe’s expects revenue of about $92 billion this year, saying that represents 30% same-store sales growth on a two-year basis. It also said it plans to buy back at least $9 billion of its stock.

Ellison, who is leading the company’s turnaround, said Lowe’s will continue to focus on driving higher profits through higher productivity.

In its earnings report a day earlier, rival Home Depot fell short of expectations for same-store sales in the fiscal second quarter, as some customers’ appetite for do-it-yourself projects faded. The company also declined to provide an outlook for the year, citing uncertainty about factors from supply-chain headaches to the delta variant’s influence on consumer spending. Its shares closed down 4.27% to $320.75 on Tuesday.

Lowe’s shares closed down 5.8% to $182.26 on Tuesday after Home Depot’s earnings report. They’re up about 14% this year.

Read the company’s press release here.

Correction: An earlier headline misstated same-store sales growth. Same-store sales fell 1.6% in the quarter.