Lowe’s beat second-quarter profit and margin estimates on Wednesday, helped by enduring demand for home repairs after winter, though cautious consumer spending forced the home-improvement retailer to lower annual targets.
The results come a day after larger rival Home Depot beat quarterly expectations and maintained full-year targets, raising investor expectations for the home-improvement sector.
Lowe’s shares rose 4 per cent in early trading, reversing course after falling 3 per cent before the bell.
The stock gained along with homebuilders such as D.R. Horton DHI.N, on hopes of lower mortgage rates and a recovery in the housing market. The U.S. government said on Wednesday morning it would double the size of liquidity support for buyback of longer-dated securities.
Lower long yields help reduce mortgage rates, making housing more affordable.
“Housing turnover is the single-most important driver of home improvement demand, because people renovate when they buy and when they sell,” said Bryan Hayes, strategist at Zacks Investment Research.
Demand generated by contractors helped Lowe’s, like rival Home Depot, offset softness in large, do-it-yourself remodeling projects that require loans.
Repair-and-maintenance demand was relatively resilient as homeowners spent on necessary upkeep.
“Customers continue to be cautious and are prioritizing how they invest in their homes,” CEO Marvin Ellison said on a post-earnings call.
Lowe’s, which earlier expected its comparable sales this year to remain flat or grow up to 2 per cent, now sees no annual growth.
The retailer posted earnings per share of $4.27 for the quarter ended July 31. Analysts on average expected $4.22, according to data compiled by LSEG. Gross margins of $8.58 billion also topped estimates of $8.54 billion.
Sales of $25.96 billion, however, lagged estimates of $26.16 billion, as same-store sales increased 0.2 per cent, below expectations of 0.8 per cent growth.
Lowe’s said its outlook now includes tariff refunds recognized in the quarter, but did not specify the amount.
(Reporting by Angela Christy in Bengaluru; Editing by Joyjeet Das)
