Like its rival Home Depot (NYSE:HD) did a week before, Lowe's (NYSE:LOW) just announced first-quarter earnings results that were hurt by a soft start to the critical spring selling season. The home improvement retailer suffered from a more significant slowdown than its larger peer as winter weather depressed demand for seasonal outdoor products. Yet management still affirmed its full-year forecast.

More on that steady outlook in a moment. First, here's how the headline results stacked up against the prior-year period:

 Metric

Q1 2018

Q1 2017

Growth (YOY)

Revenue

$17.4 billion

$16.9 billion

3%

Net income

$988 million

$602 million

64%

Earnings per share

$5.69

$3.57

59%

Data source: Lowe's financial filings. YOY = year over year.

What happened with Lowe's this quarter?

Sales growth slowed sharply, due mainly to weather challenges. Lowe's expenses also jumped, which led to lower operating profitability.

A man and a woman examining a bathroom vanity in a store

Image source: Getty Images.

The key highlights of the quarter included:

  • Comparable-store sales inched higher by 0.6%, which was well below management's full-year forecast and also trailed Home Depot's 4.2% increase. Both retailers were impacted by unseasonably cold weather that lowered demand for items like gardening equipment.
  • Gross profit margin held steady at about 34.5% of sales. Expenses rose at a faster pace than revenue did, though, which pushed operating margin down to 8.4% of sales from 9.3% a year ago. Home Depot's equivalent number also slipped but remained far above Lowe's, stopping at 13.5% for the quarter.
  • A one-time loss that was booked in the prior-year period sent reported earnings up by about 60%. On an adjusted basis, profits rose 16%, mainly due to reduced taxes.
  • Lowe's returned $1.09 billion to shareholders, split between $750 million of stock repurchase spending and $340 million of dividend payments. 

What management had to say

Management said the sales slump was limited to seasonal products and didn't affect its other growth initiatives. "We drove solid performance in indoor categories," CEO Robert Niblock said in a press release, "and continued to grow our sales to professional customers." However, he added, "prolonged unfavorable weather across geographies led to a delayed spring selling season which impacted results in outdoor categories."

Management noted that the slowdown ended as soon as the colder weather receded. "Spring has arrived and we are encouraged by strong sales in the month of May," Niblock said.

Looking forward

Home Depot explained to investors last week that a delayed spring selling season typically just shifts sales into the second quarter, and so the retailer saw no need to reduce its 2018 outlook. Lowe's affirmed its forecast, too, which calls for a modest slowdown to a 3.5% expansion pace from 4% in 2017. Home Depot is targeting a more robust 5% increase this year and its profitability target of 14.5% also outpaces Lowe's 9.5%.

Separately, Lowe's announced that Marvin Ellison, who previously oversaw U.S. sales operations at Home Depot before moving to J.C. Penney, will step in for the departing Niblock. Executives said the new hire represents a "great win" for the business, given Ellison's deep experience previously working for Lowe's chief rival. The new leader's main priority will be to close the market share gap with Home Depot while protecting, and hopefully expanding, profit margin. The change to a new CEO might also be an opportunity for Lowe's to reconsider its cautious capital return program and lift its dividend payout up from its current 35% target to something closer to Home Depot's 55%.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool has the following options: short September 2018 $180 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot. The Motley Fool has a disclosure policy.