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Shares of Lowe’s Companies, Inc. (NYSE: LOW ) closed on Thursday. The stock has fallen 9% over the past three months. Home improvement retailers reported mixed results for the fourth quarter of 2022 a day ago, but despite the challenging environment, remained bullish on the long-term outlook of the home improvement market.
Quarterly performance
In Q4 2022, Lowe’s total sales rose 5% year over year to $22.4 billion but fell short of estimates. Comparable sales were down 1.5%. Adjusted EPS rose 28% to $2.28, beating expectations.
Home improvement trends
In Q4, comparable sales for its US home improvement business fell 0.7% but Lowe’s saw strong sales in its Pro customer category. In its quarterly conference call, the company said the majority of its Pro customers appear to have a healthy backlog. In Pro, the company sees strength in categories like rough pipes, paints and mills. Lowe’s also saw solid DIY demand in its core home improvement category during the quarter.
Despite the macroeconomic uncertainty, Lowe’s remains optimistic about the core drivers of the business – disposable personal income, house price appreciation, and the longevity of the housing stock. On the call, Lowe stated that consumer savings are still about $1.5 trillion higher than pre-pandemic. Additionally, the housing stock continues to age with 50% of US homes over 41 years old.
The company believes that these factors, along with strong millennial household formation, remote work models, and increased choice among baby boomers to age will benefit its business. Lowe’s continues to see more consumers choosing to upgrade their existing homes to meet their changing needs. All of these factors lend confidence to the mid- and long-term outlook for the home improvement industry.
Outlook
Although the long-term outlook for the home improvement market remains strong, Lowe’s expects home investment to remain under pressure in 2023. The company predicts a slight decline in the home improvement market due to inflation, higher interest rates and more cautious consumers.
For FY2023, Lowe’s expects total sales of approx. $88-90 billion while comparable sales are expected to decline 2% compared to last year. EPS is expected to be between $13.60-14.00.
Click here to read the full transcript of Lowe’s Q4 2022 earnings conference call
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