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08/17/2022

Weather again cools off Lowe’s fiscal performance; employees get bonus

Dan Berthiaume
Senior Editor, Technology
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Lowe’s saw small drops in sales and earnings in the second quarter.

For the second straight quarter, Lowe’s Companies Inc. reported year-over-year declines in revenues and earnings.

The leading home improvement retailer said a shortened spring and lower demand in certain discretionary categories impacted its results, including total sales slightly dropping to $27.5 billion, compared to $27.6 billion in the second quarter of 2021. Comparable sales decreased 0.3%, although comparable sales for the U.S. home improvement business increased 0.2% for the second quarter.

Net earnings also slightly dropped year-over-year, to $2.99 billion from $3.01 billion. Diluted earnings per share (EPS) rose to $4.67 from $4.25 in the second quarter of 2021. In response to high inflation, Lowe’s said it is awarding its hourly frontline associates an incremental bonus of $55 million.

Lowe’s also cited unseasonably cold early spring temperatures as negatively affecting its performance in the first quarter of fiscal 2022.

[Read more: Cool weather chills Lowe’s Q1 sales]

The company now expects full year 2022 total and comparable sales toward the bottom end of its outlook range, and expects operating income and diluted EPS toward the top end of its outlook range. This reflects first half sales performance and expectations for continued pro customer strength and improving DIY trends. Lowe’s said its guidance also reflects disciplined expense management and benefits of its productivity initiatives.

Full Year 2022 Outlook -- a 53-week Year (comparisons to full year 2021 -- a 52-week year)

  • Total sales of $97 billion to $99 billion, including the 53rd week.
  • 53rd week expected to increase total sales by approximately $1 billion to $1.5 billion.
  • Comparable sales expected to range from a decline of -1% to an increase of 1%.
  • Gross margin rate up slightly compared to prior year.
  • Depreciation and amortization of approximately $1.75 billion.
  • Operating income as a percentage of sales (operating margin) of 12.8% to 13%.
  • Interest expense of $1.1 to $1.2 billion (previously $1.0 to $1.1 billion).
  • Effective income tax rate of approximately 25%.
  • Diluted earnings per share of $13.10 to $13.60.
  • Total share repurchases of approximately $12 billion.
  • ROIC1 of over 36%.
  • Capital expenditures of approximately $2 billion.

"I am pleased that our team drove operating margin improvement and effectively managed inventory despite lower-than-expected sales – a clear reflection of our relentless focus on operating discipline and productivity," said Marvin R. Ellison, Lowe's chairman, president and CEO. "Our results in the first half were disproportionately impacted by our 75% DIY customer mix, which was partially offset by our double-digit Pro growth for the ninth consecutive quarter.  Despite continued macro uncertainty, we remain confident in the long-term strength of the home improvement market and our ability to take share.”

As of July 29, 2022, Mooresville, N.C.-based Lowe's Companies Inc. operated 1,969 home improvement and hardware stores in the U.S. and Canada, representing 208 million square feet of retail selling space, and it serviced approximately 212 dealer-owned stores.