Lowe's: Rhymes with woes
Another day, another big retailer warning of consumer fatigue.
Home improvement chain Lowe’s, the number two player in the industry behind Home Depot, has something in common with its larger rival. It’s struggling to get consumers to spend at a time where inflation and broader economic concerns are hurting confidence.
Lowe’s reported a 4.3% drop in same-store sales for the first quarter on Tuesday. The company also lowered its full-year outlook for overall sales as well as same-store sales. Lowe’s said that it now expects a 2% to 4% decrease in same-store sales, compared to an earlier forecast of flat to down slightly. Lowe’s trimmed its earnings target as well.
The culprits? Lower lumber prices, which have finally started to cool off, are one problem. Home Depot blamed that too when it reported earnings last week. But a bigger problem is the sudden drop in demand from consumers.
“We are updating our full-year outlook to reflect softer-than-expected consumer demand for discretionary purchases," said Lowe's chairman, president and CEO Marvin Ellison in the earnings release.
The company added that it was predicting “lower-than-expected DIY discretionary sales.” In other words, homeowners looking to do renovation projects are the ones pulling back as opposed to builders and other housing industry professionals.
Lowe’s stock was up slightly Tuesday morning on the news. Shares of Home Depot were flat. But don’t mistake investors’ seemingly apathetic response as a sign that the bad news was already priced in. The weak outlook from Lowe’s is yet another indication of how quickly consumers are starting to pull back after dealing with more than a year of painful inflation and steady interest rate hikes from the Federal Reserve.
Target also gave a gloomy outlook last week, as did sneaker and athletic apparel retailer Foot Locker.
This steady drumbeat of retail/consumer bad news is not encouraging. If there is a silver lining here, the retail weakness could/should prompt the Fed to finally pause its rate hikes, as soon as its next meeting on June 14.
Of course, others in Washington may screw things up if lawmakers don’t agree to raise the debt ceiling in the next few weeks.