尝辞飞别’蝉 earned more than expected in the third quarter but the stock was tumbling after the home-improvement retailer reported disappointing sales and noted that consumers were reining in spending.
尝辞飞别’蝉 (ticker: LOW) reported earnings per share of $3.06, slightly better than the $3.02 expected. Sales fell to $20.5 billion, below analysts’s forecasts of $20.9 billion. Same-store sales fell 7.4%, compared with expectations of a 5.4% drop.
The home-improvement retailer reduced its forecasts for both earnings and sales for the fiscal year. It sees total sales at around $86 billion, compared with $87 billion to $89 billion previously, while management lowered its call for full-year earnings to $13 a share from an earlier range of $13.20 to $13.60.
“The company delivered strong operating performance and improved customer service despite a greater-than-expected pullback in DIY discretionary spending, particularly in bigger ticket categories,” CEO Marvin R. Ellison said.
That slowdown dragged on sales. Roughly 75% of 尝辞飞别’蝉 sales comes from the do-it-yourself segment, which “disproportionately impacted” third-quarter same-store sales performance, Ellison said.
The stock dropped 4.1% in premarket trading to $196.
The fact that Home Depot turned in better results than feared last week may be contributing to the pullback in 尝辞飞别’蝉 stock.
“We had lowered sales estimates throughout the quarter,” wrote D.A. Davidson analyst Michael Baker in a research note. “But, then HD had a beat and expectations rose for?LOW. That will heighten the disappointment in this miss and guide down.”
Both 尝辞飞别’蝉 (ticker: LOW) and Home Depot (HD) have had to navigate a tricky environment for sales of home-improvement products. High interest rates have made it harder to buy homes—a common trigger for remodeling efforts—and discouraged other big-ticket projects. The reports coming out this earnings season suggest the sector will remain under pressure for in the medium term, analysts say.
“We continue to think it is too early to ‘buy the rate drop rally’ in home improvement,” wrote Greg Melich, analyst at Evercore ISI. Melich has an In-Line rating on the shares.
Home Depot has been able to offset some of the decline in discretionary spending by selling to contractors — something 尝辞飞别’蝉 has been leaning into in recent quarters. Home Depot’s Pro business is still larger than that at 尝辞飞别’蝉, but 尝辞飞别’蝉 is steadily catching up.
AB Bernstein analyst Dean Rosenblum noted that 尝辞飞别’蝉 Pro growth outpaced Home Depot’s this quarter. Rosenblum has an Outperform rating on 尝辞飞别’蝉 and a Market-Perform on Home Depot.
Write to Sabrina Escobar at [email protected]