Lowe’s topped fourth-quarter earnings and revenue expectations, with sales rising more than 10 per cent year over year, but shares fell after the retailer issued softer-than-expected guidance for 2026. The outlook highlights continued pressure from high mortgage rates and weak housing turnover.
BNN Bloomberg spoke with Steven Zaccone, senior retail equity research analyst at Citi, who said comparable sales growth beat consensus but came in at the low end of bullish expectations, while guidance for flat to 2 per cent same-store sales growth and lower margins weighed on investor sentiment.
Key Takeaways
- Lowe’s posted fourth-quarter comparable sales growth of 1.3 per cent, beating consensus but landing at the low end of stronger investor expectations.
- Revenue climbed more than 10 per cent year over year, supported by strength in professional customers, online sales and home services.
- Initial 2026 guidance calls for flat to 2 per cent comparable sales growth, with earnings below Street expectations at the midpoint.
- High mortgage rates and low housing turnover remain key constraints on large renovation projects such as kitchens, bathrooms and flooring.
- Retailers are expanding further into professional contractors through acquisitions, a long-term strategy that may pressure margins but positions them for an eventual housing recovery.
Read the full transcript below:
ROGER: Lowe’s beat Wall Street expectations in the fourth quarter, with sales surging more than 10 per cent year over year, but shares are falling after the company issued a weaker-than-expected outlook. Joining us now for some analysis is Steven Zaccone, senior retail equity research analyst at Citi. Steven, thanks very much for joining us.
STEVEN: Thanks for having me on.
ROGER: Kind of déjà vu all over again compared to Home Depot — decent numbers, but it’s that outlook that has people worried.
STEVEN: Yeah, déjà vu is a fair way to think about it. I think when you look at 2026, it’s very much a year of gradual improvement in the home improvement backdrop. The next few years should be better than the last couple of years. You’ve got consumer uncertainty. You’ve got a frozen housing market here in the United States. Those are overhangs.
We’d love to see better growth for the category overall, but we’re still in this sort of environment where slight growth is kind of the new normal for home improvement. Rates coming down would be a definite tailwind, but until that really happens, or you see housing turnover pick up, slight growth is probably the new normal.
ROGER: Did the pandemic skew expectations? Has that been a factor, or are we past that and dealing with different factors now?
STEVEN: I think we’re getting to the later stages of that giveback from the pandemic. It’s a great question. That was really the factor in 2022, 2023, 2024 and 2025. You really saw engagement come back to the home for the existing homeowner.
The problem now is you’ve got so many homeowners who are locked in at a certain rate and they’re not moving. Existing home sales is really the key metric we’re looking for to drive an increase in large project activity — flooring, kitchen and bathroom remodels, some of those big-ticket items. That’s really the issue right now.
The second thing I’d bring up is tariffs, which we’ve discussed previously. I think there is some sticker shock with the U.S. consumer when you think about doing a project. We have higher building material costs. There’s been inflation and tariffs, but just generally inflation across the economy. Labor availability has also been challenged in the United States, and you’re seeing some aspects of that in project costs.
ROGER: Is there a moment where pent-up demand kicks in? Are people going to have to start doing these projects, or can they keep putting them off if the economy doesn’t change?
STEVEN: We’ve heard about pent-up demand for some time, so there’s a little fatigue around that narrative. There should be pent-up demand. If mortgage rates get below 5.5 per cent, below 5 per cent, those people who are in the low 4 per cent range might be willing to trade up and purchase a new home. So you do see pent-up demand from turnover.
When you look at people already in their homes, they did complete a lot of projects. So you probably need the turnover piece to really see that demand come through. Lowe’s gave a good data point today as well — we’re still underhoused in the U.S. Some industry data points to roughly 16 million housing units needing to be built over the next couple of years.
There are tailwinds to be positive on home improvement over a multiyear basis. It’s just that the shape of the recovery has been difficult to predict over the last couple of years.
ROGER: They’ve been pushing more into professional contractors. Is that working? And could that be a big benefit if housing starts pick up again?
STEVEN: It’s a great question, and it’s an aspect of both Home Depot and Lowe’s that’s changed over the last couple of years. We’ve seen acquisitions to get bigger into the large pro and building materials space. It’s really a land grab to go after those dollars.
You’re in a weaker housing environment, so you buy assets to build capabilities so that on the other side of this you come out stronger. I think that’s the right long-term strategy.
The concern is those businesses are a bit more cyclical and carry somewhat lower margins. Bringing it back to Lowe’s today, you saw that in the initial outlook for 2026 — a lower-margin outlook and earnings below the Street. They’ll have an analyst day later this year in December, and we’ll hear more about the longer-term opportunity.
Our house view at Citi is that we prefer Home Depot because they’ve done a better job integrating assets and there’s less margin concern going forward.
ROGER: Would you say Home Depot had the better report?
STEVEN: We’re partial with a buy rating, so I would say so. It’s important to keep in mind that Home Depot had an analyst day in December and did the heavy lifting in terms of setting 2026 expectations at that time. It feels like they set the floor. But looking at the reaction, it seems like Home Depot had the better day.
ROGER: Anything else in the pipeline for Lowe’s beyond the push into professional contractors?
STEVEN: Home improvement is always dictated by the weather. I’m home for the third day in a row because we still have snow in the New York area. A stronger spring than the last couple of years would help.
We haven’t seen much storm impact recently. If winter storms lead to roofing repairs in the spring, that could help. We didn’t really have major hurricanes in 2025, so if there is more hurricane damage in 2026, that tends to support demand. Weather is the wild card.
ROGER: We’ll wrap it up there. You can keep the snow — we have enough up here. Thank you.
STEVEN: Thanks very much.
ROGER: Steven Zaccone, senior retail equity research analyst at Citi.
---
This BNN Bloomberg summary and transcript of the Feb. 25, 2026 interview with Steven Zaccone are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
