(Reuters) -Lowe’s Cos Inc cut its annual comparable sales and profit forecasts on Tuesday, as demand dwindles for home improvement goods with high inflation forcing consumers to cut back on discretionary spending.
Shares fell about 2% premarket after the North Carolina-based company also missed estimates for first-quarter comparable sales.
Persistent inflation has squeezed household budgets across the U.S., prompting many consumers to pause remodeling projects around their houses and weighing on sales of tools, building materials and appliances at home improvement chains.
Lowe’s results reinforce a recent trend of U.S. consumers focusing on spending on essentials while pulling back on non-essentials.
This was reflected in grim forecasts from larger rival Home Depot Inc and Target Corp, while Walmart Inc raised its expectations on a lift from groceries.
Home improvement chains are also struggling as Americans prioritize on travel, leisure activities and other services instead of investing further in their houses, while a more than 60% slide in lumber prices also pressured sales.
A damp and delayed start to the Spring season in parts of the U.S. also forced consumers to put off some projects.
Even as sales to “Pro-customers” – which includes professional builders, contractors and handymen – were positive in the reported quarter, the company is bracing for softer-than-expected demand for discretionary purchases, CEO Marvin Ellison said.
Lowe’s makes roughly 75% of its sales to Do-It-Yourself (DIY) customers and the rest to Pro-customers, unlike Home Depot, where DIY accounts for roughly half of the customer base.
Lowe’s now expects full-year comparable sales to fall between 2% and 4%, compared to a prior outlook of flat to down 2%.
It also projected 2023 adjusted earnings between $13.20 and $13.60 per share, compared with $13.60 to $14.00 estimated previously.
Comparable sales fell 4.3% in the first quarter, compared with analysts’ expectations of a 3.23% drop, according to Refinitiv data.
(Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila)
