8-K: Lowe's Reports Modestly Better-Than-Expected Q3 Results, Updates Full-Year Outlook

Lowe's Companies Inc. announced its third-quarter 2024 financial results, reporting a slight decrease in comparable sales but exceeding expectations, and updated its full-year outlook.

Summary

• Lowe's reported net earnings of $1.7 billion and diluted earnings per share (EPS) of $2.99 for the third quarter ended November 1, 2024.
• This compares to a diluted EPS of $3.06 in the third quarter of 2023.
• The company recognized a $54 million pre-tax gain from the 2022 sale of its Canadian retail business, which positively impacted diluted EPS by $0.10.
• Excluding this gain, the adjusted diluted EPS was $2.89.
• Total sales for the quarter were $20.2 billion, down from $20.5 billion in the same quarter last year.
• Comparable sales decreased by 1.1%, due to softness in DIY bigger-ticket discretionary demand, but this was partially offset by storm-related sales and positive comparable sales in Pro and online.
• The company repurchased approximately 2.9 million shares for $758 million and paid $654 million in dividends during the quarter.
• Lowe's updated its full-year 2024 outlook, projecting total sales of $83.0 to $83.5 billion, comparable sales down -3.0% to -3.5%, and adjusted diluted EPS of approximately $11.80 to $11.90.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to better-than-expected results and an improved full-year outlook, despite a slight decrease in comparable sales. The company's focus on Pro and online sales is also viewed favorably.

Positives

• The company's results were modestly better than expected, even without considering storm-related sales.
• Pro sales showed high-single-digit positive growth, indicating strength in the professional customer segment.
• Online sales experienced growth, driven by increased traffic and conversion rates, including double-digit traffic growth on the app.
• The company returned $1.4 billion to shareholders through dividends and share repurchases.
• The full-year outlook for total sales and adjusted diluted EPS was increased.

Negatives

• Comparable sales decreased by 1.1% overall, indicating a decline in customer spending.
• DIY bigger-ticket discretionary demand remained soft, impacting overall sales.
• Operating margin decreased by 60 basis points compared to the previous year.
• Adjusted operating margin decreased by 86 basis points compared to the previous year.
• Diluted EPS decreased by 2% compared to the previous year.

Risks

• The company faces risks related to general economic conditions, including inflation and consumer spending.
• Changes in the housing market, such as home price appreciation or decreasing housing turnover, could impact demand.
• The company is exposed to risks from natural disasters, geopolitical conflicts, and other factors that can negatively affect customers.
• The company is exposed to risks from trade policy changes or additional tariffs.

Future Outlook

The company updated its full-year 2024 outlook, projecting total sales of $83.0 to $83.5 billion, comparable sales down -3.0% to -3.5%, and adjusted diluted EPS of approximately $11.80 to $11.90.

Management Comments

• Our results this quarter were modestly better-than-expected, even excluding storm-related activity, driven by high-single-digit positive comps in Pro, strong online sales and smaller-ticket outdoor DIY projects, said Marvin R. Ellison, Lowe's chairman, president and CEO.
• Id like to extend my heartfelt sympathy to those who suffered losses from Hurricanes Helene and Milton.
• I would also like to express my appreciation for our associates, suppliers and first responders for their commitment to the impacted communities.
• Next month at our Analyst and Investor Conference, I look forward to discussing our new growth and productivity initiatives, which underscore our confidence that we are well-positioned to capitalize on the expected recovery in home improvement.

Industry Context

The results reflect a mixed environment for the home improvement sector, with strong Pro sales and online growth contrasting with weakness in DIY discretionary spending. This suggests a shift in consumer behavior and spending patterns within the industry.

Comparison to Industry Standards

• Home Depot, a major competitor, reported a 3.1% decrease in comparable sales in their most recent quarter, indicating that Lowe's -1.1% decrease is better than a key competitor.
• Other home improvement retailers have also noted a slowdown in DIY spending, suggesting this is a broader industry trend.
• Lowe's focus on Pro sales aligns with a broader industry trend of targeting professional contractors, who tend to have more consistent spending patterns.
• The growth in online sales is consistent with the overall shift towards e-commerce in the retail sector.

Stakeholder Impact

• Shareholders will be impacted by the share repurchases and dividend payments.
• Employees are recognized for their commitment to the impacted communities.
• Customers will be impacted by the company's focus on Pro and online sales.
• Suppliers are recognized for their commitment to the impacted communities.

Next Steps

• The company will discuss new growth and productivity initiatives at its Analyst and Investor Conference next month.
• A conference call to discuss third quarter 2024 operating results is scheduled for today, Tuesday, Nov. 19, at 9 a.m. ET.

Key Dates

Keywords

Lowes, Home Improvement, Retail, Earnings, Sales, EPS, Comparable Sales, DIY, Pro, Online Sales, Share Repurchase, Dividends, Financial Results, Outlook