In a significant move reflecting current market dynamics, Lowe's has revised its full-year outlook downward due to disappointing do-it-yourself (DIY) business sales and persistent macroeconomic challenges. In its latest fiscal second-quarter report, the home improvement chain revealed that its financial results have declined year-over-year, prompting a reassessment of future earnings and sales expectations. Currently, Lowe's anticipates adjusted earnings per share (EPS) for fiscal 2024 to be between $11.70 and $11.90.
This marks a decrease from prior predictions of $12 to $12.30. Additionally, projected sales figures have also seen a downward adjustment, with expectations set between $82.7 billion and $83.2 billion, down from earlier projections of $84 billion to $85 billion. According to consensus estimates available on Capital IQ, normalized EPS is anticipated to be $12.04, with revenue expected to reach $83.88 billion. Furthermore, Lowe's anticipates a notable decline in comparable sales, projected to fall between 3.5% to 4% for the current fiscal year.
This is a revision from the company's earlier outlook which forecasted a dip of 2% to 3%. Current market estimates suggest a decrease of approximately 2.6% in same-store sales for the year. In a commentary to clients, Truist Securities remarked, "While we never love negative revisions, we think investors already anticipated a similar change.
The near-term outlook remains complex as negative factors such as softening fundamentals may be balanced out by potential positives like expected interest rate cuts. Nonetheless, we remain staunch buyers for medium to long-term investors." The three-month period ending August 2 showed net earnings for Lowe’s at $4.17 per share, a decline from $4.56 the previous year, although it surpassed analyst forecasts of $4 per share.
It's worth noting that the earnings report benefitted from a $0.07 per share gain linked to the 2022 sale of its Canadian retail operations. When this gain is excluded, the earnings only reached $4.10 per share. Additionally, it is essential to recall that last year, Lowe's completed the sale of its Canadian retail division to Sycamore Partners, a strategic move aimed at restructuring its core business operations. On the sales front, Lowe's reported a revenue decrease to $23.59 billion, down from $24.96 billion during the same quarter last year, narrowly missing the market's expectations of $23.96 billion.
The comparable sales dropped by 5.1%, which was more significant than the 4.2% decline that had been anticipated, primarily attributable to ongoing pressure from discretionary big-ticket DIY spending and adverse weather conditions that affected seasonal sales and outdoor categories. Despite these headwinds, Chief Executive Marvin Ellison expressed confidence in the company's operational strategy.
"The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner. As we look ahead, we are confident that we are making the right long-term investments to take share when the market recovers," he stated. Gross margin as a percentage of sales was recorded at 33.5%, down slightly from 33.7% in the same quarter last year.
Furthermore, selling, general, and administrative expenses have decreased to $4.03 billion, a slight reduction from $4.09 billion in the previous year. As for the stock performance, Lowe's shares closed at $242.75, reflecting a change of -0.46 or a percent change of -0.19. Investors should continue to monitor developments as Lowe’s navigates these market challenges, balancing strategic investments with consumer demand fluctuations..