Lowe’s Companies (LOW): A few points to note about the Q3 2024 performance

Shares of Lowe’s Companies, Inc. (NYSE: LOW) rose over 1% on Wednesday. The stock has gained 8% over the past three months. The company delivered better-than-expected earnings results for the third quarter of 2024 and raised its guidance for the full year but its underlying challenges persist. Here are a few points to note about the Q3 performance:

Revenue and earnings

Lowe’s revenue and earnings for the third quarter of 2024 declined compared to the year-ago period but surpassed expectations. Total sales dipped 1% to $20.2 billion while GAAP earnings were down 2% to $2.99. Adjusted EPS was $2.89.  

DIY weakness cushioned by Pro strength

Lowe’s is facing a challenging environment in the home improvement market as customers continue to be pressured by inflation and interest rates. Although interest rates are starting to come down, it remains to be seen when this will lead to an uptick in demand for home improvement.

Lowe’s continued to see weakness in bigger-ticket discretionary demand within the do-it-yourself (DIY) segment, which led to a 1.1% decrease in comparable sales in the third quarter. This softness was partly offset by strength in professional, or Pro, customer segment sales and online sales.

In Q3, the home improvement retailer recorded sales growth in the Pro segment along with high-single-digit positive comps. This momentum was driven by investments made to improve the shopping experience for Pro customers, with particular focus on the small to medium-sized Pro customer. On its conference call, Lowe’s mentioned that the backlogs of its Pro customers remain strong.

The company saw growth in its online sales with a 6% increase in comparable sales during the quarter, as well as a rise in online conversion and traffic.  

Lowe’s Q3 results benefited from smaller ticket outdoor DIY projects as customers sought to revive their lawns after an intense summer, which drove demand in categories like lawn care, landscape projects, and fall clean-up supplies. Hurricane-related sales of products like generators, chainsaws, cleaning supplies, and flashlights helped drive positive comps in the hardlines category.

Comparable average ticket rose 0.2% in Q3, driven by strength in Pro, an increase in average ticket for appliances and sales of storm-related products. Comparable transactions declined 1.3%, with softness in DIY discretionary projects partly offset by growth in Pro transactions.   

Raised guidance

Lowe’s updated its guidance for the full year of 2024 based on its Q3 results and modest storm-related demand anticipated in the fourth quarter of 2024. The company now expects total sales of $83.0-83.5 billion for the year versus the previous expectation of $82.7-83.2 billion. Comparable sales is now expected to decline 3.0-3.5% YoY versus the prior range of 3.5-4.0%. Adjusted EPS is now expected to be $11.80-11.90 versus the previous outlook of $11.70-11.90.