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Lowe’s Sales Forecast Underscores Concerns Over Tardy U.S. Home Improvement Recovery

Lowe’s is experiencing a slower recovery in the home-improvement market due to persistent inflation and economic uncertainty. Investors were expecting a more normalized U.S. home improvement environment this year after 2023 was dubbed a transition period. The company experienced a 6.2% YoY decrease in its comparable sales during the period.

Persistent inflation and a stagnant housing market are forcing consumers to hold out on big-ticket purchases. The company is particularly squeezed as Do-It-Yourself (DIY) customers, who generate 75% of its total sales, are allocating fewer dollars to large-scale home remodelling and cutting back on discretionary items. 

Lowe’s forecasts comparable sales to be down 2% to 3% in fiscal 2024, while analysts were expecting a 1.13 per cent drop. The company is banking on its new DIY loyalty program, expected to roll out nationwide in March, to help draw demand from more value-sensitive customers. 

The # 2 U.S. home-improvement chain has projected annual per-share earnings between $12.00 and $12.30, versus LSEG estimates of $12.75. However, Lowe’s topped fourth-quarter expectations on demand from pro-customers, sending its shares up 3% in early trade.

Source: Globe and Mail
Source: Retail Insight
Source: Lowes

Best Buy Thrives in Holiday Quarter as Deals, Memberships Stoke Demand

Best Buy reported a smaller drop in fourth-quarter sales than expected and beat profit estimates, thanks to holiday deals for big-ticket purchases and growth in paid memberships. Shares rose 5% as the company forecasted a recovery in comparable sales in the back half of 2024 and said it would cut some roles without providing more details. 

The company is taking steps to right-size parts of the business where it expects lower volume, whether due to lower industry sales or decisions in paid memberships. 

The subscription tiers of $179.99 and $49.99 per year led to better services margin rates, helping the quarterly gross profit rate rise from a year ago. CFO Matt Bilunas expects memberships to help expand the rate by about 20 to 30 basis points in fiscal 2025, while anticipating upgrades and replacements for gadgets bought early in the pandemic.

“Excitement around AI-enabled products have investors looking at FY25 as the likely bottom of the industry’s sales pressure,” John Tomlinson, a senior analyst at M Science said.

Source: Globe and Mail
Source: Best Buy