Release Date: November 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lowe's Companies Inc (LOW, Financial) reported third quarter sales of $20.2 billion, with results modestly better than expected, driven by strong Pro and online sales.
- Pro sales saw high single-digit positive comps, attributed to investments in serving small to medium-sized Pro customers and enhancing the Pro shopping experience.
- Online sales grew by 6%, with increased online conversion and traffic, including a double-digit increase in traffic on the Lowe's mobile app.
- The MyLowe's Rewards loyalty program, launched in March, is showing promising results in key performance metrics like repeat purchases and average order value.
- Lowe's Companies Inc (LOW) is investing in its Total Home Strategy to position the company for long-term growth and sustainable market share gains, anticipating a home improvement market recovery.
Negative Points
- Comparable sales were down 1.1% in the third quarter, with DIY discretionary bigger ticket projects remaining soft.
- The macro environment remains challenging, with high interest rates and inflation putting pressure on consumer affordability and housing turnover at near 30-year lows.
- Gross margin was impacted by storm-related pressures, including mix pressure from lower-margin products and incremental transportation costs.
- Adjusted SG&A delevered 86 basis points versus prior year, partly due to direct storm-related expenses and incremental labor costs.
- The outlook for fiscal 2024 includes a decline in comparable sales by 3% to 3.5%, reflecting ongoing pressure in DIY discretionary projects and macroeconomic challenges.
Q & A Highlights
Q: Can you provide more details on the DIY loyalty program and its future plans?
A: Marvin Ellison, CEO, explained that the DIY loyalty program, launched in March, has been successful with increased membership and key metrics like repeat purchases and average order value. The company plans to discuss future strategies at the upcoming Analyst and Investor Conference.
Q: How is Lowe's preparing for potential tariff increases?
A: Marvin Ellison, CEO, stated that while it's early to predict tariff impacts, Lowe's has strengthened its processes and diversified sourcing. William Boltz, EVP of Merchandising, added that they have enhanced tools and strong supplier relationships to manage any challenges.
Q: What are your thoughts on the DIY market trends and future outlook?
A: Marvin Ellison, CEO, acknowledged the current pressure on DIY due to macroeconomic factors but emphasized the importance of the DIY segment to Lowe's. The company is focusing on Pro and online growth while awaiting macro improvements to boost DIY demand.
Q: Can you elaborate on the impact of hurricanes on Q3 results and expectations for Q4?
A: Brandon Sink, CFO, noted that hurricanes contributed a 100 basis point lift to Q3 comps, mainly in the latter half. The storms affected gross margins due to product mix and additional costs. A modest storm-related benefit is expected in Q4, but no significant margin drags are anticipated.
Q: How is Lowe's managing expenses and margins amid affordability challenges?
A: Marvin Ellison, CEO, highlighted Lowe's focus on disciplined expense management and productivity improvement initiatives (PPI) to maintain margins. Brandon Sink, CFO, added that the company continues to invest strategically while managing costs effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
