Lowe's (LOW 2.56%) shareholders are losing ground to a slumping market so far this year. The stock fell 32% in the first half of 2022, according to data provided by S&P Global Market Intelligence, compared to a 21% drop in the S&P 500.
That decline looks better when compared to rival Home Depot (HD 1.96%), whose stock is also down significantly in 2022. And Lowe's shares are outperforming the market over the past full year. However, the recent slump reflects investors' fears about an impending slowdown in the home improvement market.
Lowe's latest earnings report, in mid-May, didn't inspire much confidence from Wall Street. Yes, the chain's sales are still well above the level that investors saw in pre-pandemic days. But the retailer's comparable-store sales fell through late April even as Home Depot notched a slight increase.
Management blamed the shortfall on cooler spring temperatures, which contributed to weaker sales for its outdoor seasonal products. Lowe's also trailed its bigger peer on key earnings metrics like operating profit margin, even though both retailers remain solidly profitable today.
Lowe's last earnings outlook affirmed its call for flat sales in 2022 following two consecutive years of big gains. Wall Street is worried that the slowdown might accelerate in 2023 as rising interest rates pressure the housing market. Lowe's business could be hit especially hard if a recession occurs. That factor alone helps explain most of the stock's decline so far this year.
Investors will get an important update on Lowe's short-term growth potential when the company announces its fiscal second-quarter results on Aug. 17. In any case, the business is likely to survive a consumer spending pullback, just as it has in previous recessions stretching back for decades.
The Dividend Aristocrat has boosted its annual payment in each of the last 48 years, and that streak would only be threatened by an unusually severe, and lengthy, economic downturn.