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Lowe’s Companies ((LOW - Free Report) ) posted mixed results this week for their Q3, with the topline missing the Zacks Consensus Estimate while EPS fell in line with estimates. And both sales and earnings fell from the previous year’s quarterly readings.
Lowe’s has evolved as one of the world’s leading home improvement retailers, competing with Home Depot ((HD - Free Report) ) and offering services to homeowners, renters and commercial business customers.
The company has been smartly enhancing the experience of its pro customers by upgrading pro-focused brands and revamping pro-service business website, LowesForPros.com.
But it's looking like the hey-days of the 2021-22 real estate scramble to "buy anything, at any price" and fix-to-flip are now solidly in the rearview mirror with housing prices extended and interest rates prohibitive.
This is showing up in the downward estimate revisions among the majority of analysts on LOW.
Quarter in Detail
Adjusted earnings per share (EPS) of $3.06 barely surpassed the Zacks Consensus Estimate of earnings of $3.05 per share but dipped 6.4% from the third-quarter fiscal 2022 tally.
Net sales of $20,471 million decreased 12.8% year over year and came below the consensus estimate of $20,974 million. Comparable sales (comps) fell 7.4% in the quarter under review, driven by lower DIY discretionary spending, partly offset by Pro customer comps. We had projected a comps decline of 4% for the quarter under discussion.
Gross profit slipped 11.9% year over year to $6,891 million, while the gross margin increased 36 basis points (bps) to 33.7%. We had expected a gross margin expansion of 10 bps year over year. Operating income amounted to $2,696 million, up from $924 million recorded in the year-earlier quarter. Also, the operating margin expanded to 13.2% from the year-earlier quarter’s reported figure of 3.9%.
Other Financial Aspects & Developments
LOW ended the quarter with cash and cash equivalents of $1,210 million, long-term debt (excluding current maturities) of $35,374 million and shareholders’ deficit of $15,147 million.
Lowe’s generated cash flow from operations of $7,032 million for the nine months of fiscal 2023. Capital expenditures amounted to $1,344 million for the aforementioned period. For fiscal 2023, LOW expects a capex of up to $2 billion.
In the reported quarter, Lowe’s bought back 7.3 million shares for $1.6 billion and paid out dividends of $642 million.
In the fiscal third quarter, it introduced a store and three Lowe's Outlet stores. As of Nov 3, 2023, Lowe’s operated 1,746 home-improvement stores.
Outlook
For fiscal 2023, management revised the outlook on weaker-than-expected DIY sales. LOW now projects revenues of $86 billion versus $87-$89 million expected earlier and $97.1 billion delivered in fiscal 2022.
Comparable sales in fiscal 2023 are envisioned to be down 5% year over year versus the previous guided range of -2% to -4%. The adjusted operating margin is expected to be 13.3% compared with the earlier prediction of 13.4-13.6%.
Management anticipates EPS of $13.00 versus the earlier forecast of $13.20-$13.60 for the fiscal year versus earnings of $13.89 per share earned in fiscal 2022.
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Bear of the Day: Lowe's (LOW)
Lowe’s Companies ((LOW - Free Report) ) posted mixed results this week for their Q3, with the topline missing the Zacks Consensus Estimate while EPS fell in line with estimates. And both sales and earnings fell from the previous year’s quarterly readings.
Lowe’s has evolved as one of the world’s leading home improvement retailers, competing with Home Depot ((HD - Free Report) ) and offering services to homeowners, renters and commercial business customers.
The company has been smartly enhancing the experience of its pro customers by upgrading pro-focused brands and revamping pro-service business website, LowesForPros.com.
But it's looking like the hey-days of the 2021-22 real estate scramble to "buy anything, at any price" and fix-to-flip are now solidly in the rearview mirror with housing prices extended and interest rates prohibitive.
This is showing up in the downward estimate revisions among the majority of analysts on LOW.
Quarter in Detail
Adjusted earnings per share (EPS) of $3.06 barely surpassed the Zacks Consensus Estimate of earnings of $3.05 per share but dipped 6.4% from the third-quarter fiscal 2022 tally.
Net sales of $20,471 million decreased 12.8% year over year and came below the consensus estimate of $20,974 million. Comparable sales (comps) fell 7.4% in the quarter under review, driven by lower DIY discretionary spending, partly offset by Pro customer comps. We had projected a comps decline of 4% for the quarter under discussion.
Gross profit slipped 11.9% year over year to $6,891 million, while the gross margin increased 36 basis points (bps) to 33.7%. We had expected a gross margin expansion of 10 bps year over year. Operating income amounted to $2,696 million, up from $924 million recorded in the year-earlier quarter. Also, the operating margin expanded to 13.2% from the year-earlier quarter’s reported figure of 3.9%.
Other Financial Aspects & Developments
LOW ended the quarter with cash and cash equivalents of $1,210 million, long-term debt (excluding current maturities) of $35,374 million and shareholders’ deficit of $15,147 million.
Lowe’s generated cash flow from operations of $7,032 million for the nine months of fiscal 2023. Capital expenditures amounted to $1,344 million for the aforementioned period. For fiscal 2023, LOW expects a capex of up to $2 billion.
In the reported quarter, Lowe’s bought back 7.3 million shares for $1.6 billion and paid out dividends of $642 million.
In the fiscal third quarter, it introduced a store and three Lowe's Outlet stores. As of Nov 3, 2023, Lowe’s operated 1,746 home-improvement stores.
Outlook
For fiscal 2023, management revised the outlook on weaker-than-expected DIY sales. LOW now projects revenues of $86 billion versus $87-$89 million expected earlier and $97.1 billion delivered in fiscal 2022.
Comparable sales in fiscal 2023 are envisioned to be down 5% year over year versus the previous guided range of -2% to -4%. The adjusted operating margin is expected to be 13.3% compared with the earlier prediction of 13.4-13.6%.
Management anticipates EPS of $13.00 versus the earlier forecast of $13.20-$13.60 for the fiscal year versus earnings of $13.89 per share earned in fiscal 2022.