(Reuters) -Lowe’s Cos on Tuesday joined larger rival Home Depot in signaling a slower recovery in the home-improvement market as consumers remain tight-fisted against the backdrop of elevated prices and uncertainty over the economy’s prospects.
Investors were betting on a more normalized U.S. home improvement environment this year after 2023 was seen as a transition year as the industry digested the outsized gains from the pandemic.
“Maybe (the forecast is) telling us that the recovery is being pushed out a little bit … but the fourth quarter was actually really good relative to expectations. The gap did narrow … versus Home Depot,” D.A. Davidson analyst Michael Baker said.
The No.2 U.S. home-improvement chain’s shares were oscillating between gains and losses in premarket trade. They were last down marginally.
Customers are allocating fewer dollars to large-scale home remodeling and instead taking up only necessary repair and maintenance projects.
Do-It-Yourself (DIY) customers, who make up 75% of Lowe’s total sales, have especially pulled back on spending on appliances and other discretionary categories such as kitchen and flooring.
In comparison, DIY accounts for roughly half of Home Depot’s business.
Still, Lowe’s topped expectations for fourth-quarter results as demand from Pro-customers offset weakness in DIY.
Profit of $1.77 per share beat estimates of $1.68, while same-store sales declined 6.2% for the three months ended Feb. 2, compared with expectations for a 7.06% drop.
“The implication I took away was if weather was better, (Lowe’s sales) probably would have been a little bit better even in January,” said Telsey Advisory Group analyst Joseph Feldman.
Lowe’s forecast comparable sales to be down 2% to 3% in fiscal 2024, while analysts on average were expecting a 1.13% drop.
It projected annual earnings per share between $12.00 and $12.30, compared with estimate of $12.75, according to LSEG data.
(Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila)
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