An exterior view of a Lowe’s home improvement store in Selinsgrove.
Paul Weaver | Lightrocket | Getty Images
Lowe’s beat Wall Street’s earning expectations on Wednesday as demand for home projects picked up during the quarter, but homeowners’ appetite for bigger projects remained weak.
The retailer also announced its latest effort to attract more business from home professionals. It said on Wednesday that it has struck a deal to acquire Foundation Building Materials, a distributor of drywall, insulation and other interior building products for large residential and commercial professionals, for about $8.8 billion.
Home improvement demand has been weaker as higher borrowing costs and mortgage rates keep some homeowners and potential homebuyers on the sidelines. To overcome those slower sales, Lowe’s has looked to home professionals — a steadier and more lucrative customer — to drive sales.
It has made two pro-focused acquisitions in recent months: Artisan Design Group, a company that provides design services and installation of flooring, cabinets and countertops for homebuilders and property managers, and Foundation Building Materials, which it announced on Wednesday.
On the company’s earnings call, CEO Marvin Ellison said there’s a “healthy pipeline of demand for home improvement and new home construction ahead” because of the country’s aging housing stock, gains in homeowner equity and “pent-up demand from delayed projects.”
He said the company’s investments and its two acquisitions “will uniquely position us to accelerate sales growth when the market turns.”
Shares rose about 2% in early trading.
Here’s what the company reported for the fiscal second quarter compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
Earnings per share: $4.33 vs. $4.24 expectedRevenue: $23.96 billion vs. $23.96 billion expected
In the fiscal second quarter, Ellison said the home improvement retailer saw “solid performance” in both the do-it-yourself and the home professional sides of its business.
In the three-month period that ended Aug. 1, Lowe’s net income rose to $2.4 billion, or $4.27 per share, from $2.38 billion, or $4.17 per share, in the year-ago period. Revenue increased from $23.59 billion in the year-ago quarter.
Comparable sales rose 1.1% in the quarter.
However, CFO Brandon Sink said Lowe’s strategy to grow online sales and pro sales, rather than a better home improvement backdrop, will move the needle this year.
“Our expectations for a roughly flat home improvement market and the performance of our core business remain unchanged,” he said.
Lowe’s revised its full-year outlook to reflect the acquisition of Artisan Design Group.
For the full year, Lowe’s said it expects total sales of $84.5 billion to $85.5 billion, an increase from its previous range of $83.5 billion to $84.5 billion. It reiterated its comparable sales, a metric that takes out one-time factors like store openings or closures, saying they will be flat to up 1% from the prior year. It expects earnings per share for the year of approximately $12.10 to $12.35, down slightly from its prior range of $12.15 to $12.40.
Lowe’s rival Home Depot missed Wall Street’s expectations for quarterly sales and earnings on Tuesday, but stood by its full-year forecast for 2.8% growth of total sales.
Home Depot also has bulked up its pro business with acquisitions. It acquired SRS Distribution, a Texas-based company that sells supplies to professionals in the roofing, pool and landscaping businesses, last year for $18.25 billion. Earlier this summer, it announced it was buying GMS, a building products distributor, for about $4.3 billion.
Correction: A previous version of this story misstated Lowe’s revenue for the quarter.
