© Reuters. FILE PHOTO: Shoppers load a box of merchandise into a truck after visiting a Lowe’s hardware store in Philadelphia, Pennsylvania, U.S. November 4, 2020. REUTERS/Mark Makela/File Photo
(Reuters) -Lowe’s Cos on Tuesday projected a bigger drop in annual comparable sales than previously expected and trimmed its profit forecast as inflation-hit consumers cut back spending on home-improvement projects, sending its shares down 6%.
The U.S. home improvement market has been moderating this year, with consumers going slow on big home remodeling and discretionary projects, while spending mostly on essential jobs as household budgets get stretched amid inflation worries.
Lowe’s (NYSE:) downbeat report comes in contrast with larger rival Home Depot (NYSE:), which last week topped market expectations for quarterly results on steady demand for plumbing and hardware as well as from its “pro-customers” such as professional builders and contractors.
While professional customers form about half of Home Depot’s customer base, they account for just 25% at Lowe’s, with the rest comprised of Do-It-Yourself (DIY) customers – a group that has been more cautious with their spending.
Lowe’s saw a “greater-than-expected pullback in DIY discretionary spending, particularly in bigger ticket categories” in the third quarter, CEO Marvin Ellison said.
Store traffic at Lowe’s worsened further, with visits to stores falling 9.4% in the July-September period, bigger than the 8.2% decline seen in the prior three months, data from Placer.ai showed.
The company reported a 7.4% drop in same-store sales for the three months ended Nov. 3, compared with analysts’ average estimate of a 5% drop, according to LSEG IBES data.
Lowe’s now expects full-year comparable sales to decline 5%, compared with its prior outlook for a 2% to 4% drop. Analysts on average expect a 3.4% drop.
Full-year per-share profit is now expected to be $13, down from a range of $13.20 to $13.60 estimated previously.