By Deborah Mary Sophia
(Reuters) -Lowe’s Cos Inc forecast full-year sales below market expectations on Wednesday, hammered by weak demand for home improvement products as customers save up cash for higher-priced everyday essentials.
Shares dropped nearly 3% in early trading as the company posted a bigger-than-expected drop in quarterly same-store sales due to a decline in customer transactions.
A pandemic-fueled boom in demand for products such as kitchen equipment and gardening tools is now fading as household budgets shrink, while Americans redirect their attention back to activities such as traveling.
Larger rival Home Depot Inc had also last week warned of a moderation in demand this year, while struggling with elevated costs and wage raises amid a tight U.S. labor market.
Lowe’s said it has awarded $220 million in bonuses to its employees in the fourth quarter, adding that workers would receive an incremental $7,500 bonus on top of their annual incentive bonuses.
It is also planning to invest $350 million more in wages for its frontline associates this year.
“With Home Depot helping lay the groundwork a week ago, really nothing too surprising here,” Telsey Advisory Group analyst Joe Feldman said, adding the results were in line with expectations.
Lowe’s, which has been trying to catch up with Home Depot, has more room to improve its margins this year, Feldman said. The company is expecting operating margin of 13.6% to 13.8% in 2023.
It projected full-year total sales of $88 billion to $90 billion, while analysts estimated annual revenue of $90.48 billion, according to Refinitiv data.
Lowe’s also forecast 2023 earnings in the range of $13.60 to $14.00 per share, the midpoint of which was slightly ahead of an estimate of $13.79.
Lowe’s reported a 1.5% decline in comparable sales for the three months ended Feb. 3, worse than expectations of a 0.01% drop.
(Reporting by Deborah Sophia in Bengaluru; Editing by Arun Koyyur)
