Lowe's same-store sales forecast boosted by hurricane recovery; muted DIY spend weighs

By Savyata Mishra

(Reuters) -Lowe's Cos forecast a slower-than-expected drop in annual comparable sales on Tuesday, banking on a boost to its current-quarter sales from hurricane-related demand, although big-ticket spending remained strained.

The home improvement retailer also beat third-quarter comparable sales and profit estimates, similar to bigger rival Home Depot (NYSE:HD )'s results last week.

Hurricanes Helene and Milton devastated parts of the United States, including Florida and North Carolina, causing extensive damage to homes, bridges, power infrastructure and crops.

These weather events drove customers to buy more water cans, generators, chainsaws and cleaning supplies, Lowe's executives said in a post-earnings call.

Results this quarter were modestly better than expected, even excluding storm-related activity, driven by growth in the company's professional category, strong online sales and smaller-ticket outdoor DIY projects, Lowe’s (NYSE:LOW ) CEO Marvin Ellison said.

Shares of the company fell about 4% in early trading, after having risen 22% this year. It trimmed its annual adjusted margin forecast to a range of 12.3% to 12.4%, from a previous range of 12.4% to 12.5%.

Lowe's, which generates roughly 75% of sales from the do-it-yourself category, has seen demand weaken for projects such as flooring, kitchen and bath remodeling, which typically require refinancing.

"Until mortgage rates fall, the home improvement industry will continue experiencing stiff headwinds," said Emarketer analyst Zak Stambor.

Quarterly gross margins were "a tad light" at 33.7%, analysts noted, likely driven by a low-margin product mix of storm sales.

"Lowe's should have skewed to more favorable conditions than HD," said David Wagner portfolio manager at Aptus Capital Advisors, which holds Lowe's ETFs.

Lowe's reported a 1.1% drop in same-store sales for the quarter ended Nov. 1, better than analysts' average estimate of a 2.86% decline, according to data compiled by LSEG.



It earned $2.89 per share on an adjusted basis, beating an estimate of $2.82 per share.

The company expects same-store sales to be down between 3% and 3.5% in 2024 from its prior forecast of a decline in the range of 3.5% to 4%.

Source: Investing.com