LOW | Q3 2024

The content provided on this website, including any communications, posts, videos, social media interactions, and other materials, is for informational and educational purposes only. It should not be considered as financial or investment advice. Read our full disclaimer here.

Links

• Link to Transcript

Overview

• Non-GAAP EPS of of $2.89 beats by $0.08.

• Revenue of $20.17B (-1.5% Y/Y) beats by $260M.

Takeaways

Lowe’s (LOW) Q3 2024 earnings call showed a company navigating short-term challenges while building a strong foundation for long-term growth. Still, financially, Lowe’s remains on solid ground.

CEO Marvin Ellison began by reporting $20.2 billion in sales for the quarter, with comparable sales down 1.1%. While this decline reinforces the continued slowdown in large DIY projects, Pro sales emerged as a key growth driver, increasing in the high single digits.

With that, CFO Brandon Sink reported earnings per share of $2.99, $728 million in free cash flow, and $1.4 billion returned to shareholders through dividends and buybacks.

Back to Pro, Lowe’s has made strides in making the Pro shopping experience more seamless and rewarding for small and medium-sized businesses, focusing on better inventory, top brands, and a loyalty program that keeps professionals coming back. These efforts have turned the Pro segment into a major growth machine.

Ellison highlighted the dramatic progress in this area during the Q&A session, noting that Pro customers accounted for just 20% of Lowe’s sales a few years ago. Today, that share is a lot higher, with Lowe’s growing its Pro business at twice the market rate.

The potential here is enormous, given the $250 billion size of the U.S. Pro market. This is one of the company’s top priorities for long-term growth.

Online performance was another highlight this quarter, with online sales up 6%, driven by traffic growth and a double-digit increase in activity on the Lowe’s mobile app.

Improvements like the app’s new in-store mode and a same-day paint delivery program are making shopping more convenient for both homeowners and professionals working on-site. These enhancements are part of Lowe’s broader strategy to meet customers wherever they are and deliver a more seamless shopping experience across all channels.

Despite these positive developments, Lowe’s is still operating in a difficult economic environment.

Inflation, high mortgage rates, and historically low housing turnover continue to weigh on demand for big-ticket home improvement projects. With fewer home sales, consumers have less urgency to make major renovations, and the shift in spending patterns can be seen in some of Lowe’s weaker categories, such as flooring, kitchen, and bath.

With that said, Ellison pointed to several long-term tailwinds that could unlock future growth.

Rising home values, the aging U.S. housing stock—now an average of 41 years old—and $35 trillion in untapped home equity are all strong indicators that demand for repairs and upgrades will rebound over time.

As interest rates eventually decline, Lowe’s expects these trends to inspire interest in larger DIY and do-it-for-me (DIFM) projects, and the company is positioning itself now to capture that opportunity when it comes.

Moving on, product performance varied this quarter, with some categories showing strength and others underperforming.

Outdoor and seasonal products performed well, boosted by hurricane-related sales of items like generators and chainsaws, as well as lawn care tools following a hot summer.

Building products also outperformed, particularly among Pro customers, supported by new additions such as drywall tools.

On the other hand, big-ticket DIY categories like kitchen, bath, and flooring lagged behind, reflecting the broader consumer hesitation to spend on large-scale projects.

Appliances were a notable bright spot, though, with innovative products like all-in-one washer-dryers showing strong sales, as customers were willing to pay premiums for convenience.

Lowe’s is also doubling down on customer engagement.

Its MyLowe’s Rewards program, launched in March, is already helping drive both store visits and website traffic by offering DIY customers rewards and exclusive offers. While still in its early stages, the program fits with the company’s broader goal of creating loyalty throughout all economic environments.

Overall, Lowe’s is aware of and tackling its short-term headwinds while positioning itself well for the future. The Pro segment and online sales are blossoming into key growth drivers, while investments in customer loyalty are helping the company increase its market share even in a tough environment.

---