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Why Lowe's Stock Lost 18% in May

By Demitri Kalogeropoulos – Jun 10, 2019 at 8:20AM

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The retailer stumbled at the start of the key spring selling season.

What happened

Home-improvement giant Lowe's (LOW -1.55%) underperformed a weak market last month as the stock lost 18% compared to a 7% decline in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump pushed shares to flat since the start of 2019, but they've since rebounded up 5% compared to a 15% gain for the broader market.

A man selecting a piece of lumber at a home-improvement store.

Image source: Getty Images.

So what

Investors reacted harshly to the chain's first-quarter earnings report, which was released late in the month. That announcement showed an encouraging sales growth acceleration, but Lowe's also reported a surprising drop in profitability as the retailer struggled to pass along rising costs to customers.

Now what

In just his second year in the top job, CEO Marvin Ellison expressed confidence that Lowe's could make inroads with the professional contractor segment while improving pricing over the next few quarters. Still, the chain is predicting another year of results that match up poorly with rival Home Depot (HD -1.75%).

Specifically, sales should rise by 3% while Home Depot's comps improve 5%. Lowe's is predicting flat operating margin at around 9% of sales while its peer has targeted near 15% profitability.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.

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