Home improvement retailer Lowe's Companies (LOW -1.55%) announced its Q1 2024 earnings on May 21, reporting mixed outcomes.
The quarter's performance showed a notable decline in diluted earnings per share (EPS) to $3.06 from $3.77 in the same quarter last year. Meanwhile, total sales dropped to $21.4 billion from $22.3 billion a year ago.
Comparable sales and profits both declined, but the company did show progress in areas like Pro customer sales and omnichannel capabilities.
| Metric | Current Period | Prior-Year Period | Change (YOY) |
|---|---|---|---|
| Total sales (in billions) | $21.4 | $22.3 | -4% |
| Diluted earnings per share | $3.06 | $3.77 | -18.8% |
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Source: Expectations based on management's guidance, as provided in 2024-02-27 earnings report. |
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A retail titan in home improvement
Lowe's is the second-largest home improvement retailer (after Home Depot), targeting both DIY and professional customers such as contractors. Like its key rival, it offers a wide range of products, from tools and hardware to paint and home décor.
Recent efforts have concentrated on enhancing the omnichannel shopping experience and boosting pro customer engagement. This includes initiatives like the DIY loyalty program and expanded same-day delivery options -- all aimed at integrating physical and digital channels.
Q1 achievements and challenges
This quarter saw several initiatives aimed at boosting both sales and customer satisfaction. As mentioned, Lowe's rolled out a new DIY loyalty program nationwide and partnered with DoorDash and Shipt for same-day delivery.
CEO Marvin Ellison highlighted these steps, saying, "We expanded same-day delivery options and took market share in key categories." Pro customer sales showed positive comparable sales across all regions, spotlighting its effectiveness in this strategy.
However, challenges emerged as well. Total sales dropped to $21.4 billion from $22.3 billion a year ago, reflecting reduced consumer spending, especially in the DIY segment. Comparable sales declined by 4.1%, attributed to decreased big-ticket discretionary spending among DIY customers. This downturn was exacerbated by inflation and a stagnant housing market.
Financial metrics pointed to declining profitability, with the operating margin falling to 12.4% from 14.7% in the prior year. Increased selling, general, and administrative (SG&A) expenses and higher depreciation and amortization costs contributed to this decline. Specifically, SG&A expenses rose to 18.8% of sales from 17.1% a year ago.
One-time events also impacted the quarter. The sale of its Canadian business in the prior year influenced the diluted EPS comparison. Quarterly diluted EPS reflected these changes and stood at $3.06, a decline from $3.77 in Q1 2023.
Despite these issues, Lowe's repurchased about 3 million shares for $743 million, aiming to return value to shareholders. The company also maintained its quarterly dividend at $1.10 per share, up from $1.05 a year ago, reflecting a 4.8% increase.
A cautiously optimistic outlook
Looking ahead, Lowe's remains optimistic yet wary of ongoing economic pressures. Total sales are projected between $84 billion to $85 billion, with comparable sales expected to decrease by 2% to 3%. The operating margin is anticipated to be between 12.6% and 12.7%, near the 12.4% recorded in Q1 2024.
The company plans to continue its focus on pro customer sales, omnichannel expansion, and supply chain efficiencies. Investors should watch for any shifts in consumer spending patterns, especially within the DIY segment as a result of shifts in the economy that could impact the company's sales.
