Home improvement retailer Lowe’s (NYSE:LOW) fell short of analysts’ expectations in Q2 CY2024, with revenue down 5.5% year on year to $23.59 billion. The company’s full-year revenue guidance of $82.95 billion at the midpoint also came in 1.5% below analysts’ estimates. It made a non-GAAP profit of $4.10 per share, down from its profit of $4.57 per share in the same quarter last year.

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Lowe's (LOW) Q2 CY2024 Highlights:

• Revenue: $23.59 billion vs analyst estimates of $23.96 billion (1.6% miss)

• EPS (non-GAAP): $4.10 vs analyst estimates of $4.00 (2.6% beat)

• The company dropped its revenue guidance for the full year to $82.95 billion at the midpoint from $84.5 billion, a 1.8% decrease

• EPS (non-GAAP) guidance for the full year is $11.80 at the midpoint, missing analyst estimates by 3%

• Gross Margin (GAAP): 33.5%, in line with the same quarter last year

• EBITDA Margin: 16.7%, in line with the same quarter last year

• Free Cash Flow Margin: 11.6%, down from 13.9% in the same quarter last year

• Locations: 1,746 at quarter end, up from 1,742 in the same quarter last year

• Same-Store Sales fell 5.1% year on year (-1.6% in the same quarter last year)

• Market Capitalization: $138.6 billion

"The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner. At the same time, we continue to build momentum with our Total Home strategy reflected by our mid-single-digit positive comps with the Pro customer this quarter," said Marvin R. Ellison, Lowe's chairman, president and CEO.

Founded in North Carolina as Lowe's North Wilkesboro Hardware, the company is a home improvement retailer that sells everything from paint to tools to building materials.

Home Improvement Retailer

Home improvement retailers serve the maintenance and repair needs of do-it-yourself homeowners as well as professional contractors. Home is where the heart is, so any homeowner will want to keep that home in good shape by maintaining the yard, fixing leaks, or improving lighting fixtures, for example. Home improvement stores win with depth and breadth of product, in-store consultations for customers who need help, and services that cater to professionals. It is hard for non-focused retailers and e-commerce competitors to match these. However, the research, convenience, and prices of online platforms means they can’t be fully written off, either.

Sales Growth

Lowe's is a behemoth in the consumer retail sector and benefits from economies of scale, an important advantage giving the business an edge in distribution and more negotiating power with suppliers.

As you can see below, the company’s annualized revenue growth rate of 3.2% over the last five years was sluggish as its store count dropped.

This quarter, Lowe's missed Wall Street’s estimates and reported a rather uninspiring 5.5% year-on-year revenue decline, generating $23.59 billion in revenue. Looking ahead, Wall Street expects sales to grow 1.6% over the next 12 months, an acceleration from this quarter.

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Same-Store Sales

Lowe’s demand has been shrinking over the last eight quarters, and on average, its same-store sales have declined by 3.5% year on year. The company has been reducing its store count as fewer locations sometimes lead to higher same-store sales, but that hasn’t been the case here.

In the latest quarter, Lowe’s same-store sales fell 5.1% year on year. This decrease was a further deceleration from the 1.6% year-on-year decline it posted 12 months ago. We hope the business can get back on track.

Key Takeaways from Lowe’s Q2 Results

The company's revenue missed this quarter. Adding to the pain, Lowe's cut its full year guidance across the board. Specifically, the company lowered its same-store sales, revenue, operating margin, and EPS outlook for the year. Lowe’s highlighted “lower-than-expected DIY sales and a pressured macroeconomic environment.” Overall, this was a weaker quarter. The stock remained flat at $242 immediately following the results.

Lowe's may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.