Lowe’s tops quarterly estimates, CEO says consumer sentiment improving

By Deborah Mary Sophia

(Reuters) -Lowe’s on Tuesday signaled an improvement in consumer sentiment after it topped Wall Street estimates for quarterly profit and comparable sales, as sustained spending on smaller projects countered a broader lull in the home-improvement sector.

Spending on unavoidable repair and small-scale maintenance work is making up for some of the lost demand for big-ticket items at home-improvement retailers, amid a challenging housing market and stubborn inflation.

While discretionary home-related spending remained under pressure, Lowe’s CEO Marvin Ellison said disposable income at U.S. households started to improve over the past quarter, boding well for the industry.

“Looking ahead, it’s encouraging to consider that home improvement projects are typically postponed rather than canceled,” Ellison added. It is a positive indicator for medium-term demand as consumer sentiment improves, he added.

Shares of North Carolina-based Lowe’s rose 3%, after the company reported a drop of 1.6% compared with analysts’ average estimate of a 2.36% fall in second-quarter same-store sales, and maintained its 2023 sales and profit forecasts.

A delayed spring season also pushed demand for goods such as garden equipment and outdoor supplies into the quarter from earlier in the year, helping Lowe’s and larger rival Home Depot top quarterly results estimates.

“Lowe’s has invested a lot in Pro-products, services and strategies to help attract the Pro-customer… The positive trends (are) certainly reflective of the fact that their investments are paying off,” said Joe Feldman, analyst at Telsey Advisory Group.

The company saw growth across its “Pro-customer” business, which caters to professional builders, contractors and handymen as opposed to Do-It-Yourself customers, in the quarter, thanks to its investments in services such as same-day delivery.

Lowe’s per-share earnings of $4.56 also topped estimates of $4.49, driven by falling lumber prices and tighter cost management.

(Reporting by Deborah Sophia in Bengaluru; Editing by Shinjini Ganguli)