Lowe’s Companies, Inc. (LOW Quick QuoteLOW - Free Report) posted better-than-expected results in first-quarter fiscal 2023, with the top and bottom lines beating the Zacks Consensus Estimate. While earnings improved from the previous fiscal year’s quarterly reading, sales fell on a year-over-year basis.

This presently Zacks Rank #3 (Hold) player’s shares have gained 0.8% in the past three months against the industry’s 0.9% drop.

Quarter in Detail

Adjusted earnings per share (EPS) of $3.67 surpassed the Zacks Consensus Estimate of $3.48 and rose 5% from the first-quarter fiscal 2022 tally.

Net sales of $22,347 million decreased 5.5% year over year but came ahead of the consensus estimate of $21,563 million. Comparable sales (comps) fell 4.3% in the quarter under review, driven by lumber deflation, adverse weather and weak DIY discretionary sales.

Gross profit slipped 6.5% year over year to $7,527 million, while the gross margin contracted 30 basis points (bps) to 33.7%. Operating income amounted to $3,288 million, down 0.4% year over year. However, the operating margin expanded 70 bps from the year-earlier quarter to 14.7%.

Other Financial Aspects & Developments

LOW ended the quarter with cash and cash equivalents of $2,950 million, long-term debt (excluding current maturities) of $35,863 million and shareholders’ deficit of $14,710 million.

Lowe’s generated cash flow from operations of $2,106 million for the first quarter of fiscal 2023. Capital expenditures amounted to $0.4 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 10.6 million shares for $2.1 billion and paid out dividends of $633 million.
    
As of May 5, 2023, Lowe’s operated more than 1,700 home-improvement stores across the United States.

Outlook

Management revised guidance for fiscal 2023 owing to greater-than-expected lumber deflation and weaker-than-expected DIY discretionary sales. LOW now expects revenues of $87-$89 billion versus the earlier projection of $88-$90 billion. In fiscal 2022, Lowe’s revenues were $97.1 billion.

Comparable sales in fiscal 2023 are envisioned in the range of -2% to -4%, compared with the previous projection of flat to a 2% fall. The adjusted operating margin is expected to be 13.4-13.6% versus 13.6-13.8% anticipated earlier. Management anticipates earnings per share of $13.20-$13.60 for the fiscal year versus the earlier guidance of $13.60-$14.00 and $10.17 per share earned in fiscal 2022.

Solid Picks in Retail

We have highlighted three top-ranked stocks, namely Abercrombie & Fitch (ANF Quick QuoteANF - Free Report) , Urban Outfitters (URBN Quick QuoteURBN - Free Report) and Hibbett Sports .

Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see  the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales and EPS suggests growth of 2.1% and 472%, respectively, from the year-ago reported figures. ANF delivered a negative trailing four-quarter earnings surprise of 141.2%.

Urban Outfitters, a retailer of fashion apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). URBN delivered break-even earnings in the last reported quarter.

The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and EPS suggests growth of 4% and 40.6%, respectively, from the year-ago reported figures.

Hibbett, a sporting goods retailer, currently carries a Zacks Rank of 2. The company has a negative trailing four-quarter earnings surprise of 13.9%, on average.

The consensus estimate for Hibbett’s current financial-year sales suggests growth of 5.7% from the year-ago reported figure.