Lowe's beats on quarterly sales, but lowers full-year profit forecast amid economic uncertainty
News Summary
Lowe's on Wednesday reported a year-over-year sales increase for its fiscal third quarter, beating Wall Street expectations, but lowered its full-year profit outlook due to ongoing macroeconomic uncertainty. While total sales guidance was raised to $86 billion driven by a recent acquisition, comparable sales, an industry metric excluding one-time factors, was lowered to flat from a prior range of flat to up 1%. The adjusted full-year earnings per share forecast was also slightly lowered to approximately $12.25, at the lower end of its previous range. CEO Marvin Ellison noted positive comparable sales in Q3 and the start of the current quarter, despite prior year hurricane-related headwinds. However, home improvement trends remain challenged by a slower housing market and higher borrowing costs. Similar to rival Home Depot, Lowe's is actively trying to attract contractors and other home professionals through acquisitions, such as Foundation Building Materials and Artisan Design Group, to offset weaker do-it-yourself (DIY) sales.
Background
Lowe's is one of the leading home improvement retailers in the U.S., with its business significantly influenced by housing market conditions, consumer spending capacity, and borrowing costs. In 2025, the U.S. housing market has been challenged for over two years by slower sales and relatively high mortgage rates, which have directly curbed consumer willingness to undertake major home renovation projects. To counter the trend of weakening do-it-yourself (DIY) customer demand, both Lowe's and its main competitor, Home Depot, have strategically shifted their focus more towards attracting professional contractors and builders. Lowe's recently enhanced its capabilities and market share in serving
In-Depth AI Insights
What does Lowe's updated guidance reveal about the actual state of the US consumer and the housing market under the Trump administration? - Despite beating Q3 sales estimates, Lowe's lowered full-year profit and comparable sales guidance suggests underlying economic weakness. The company's emphasis on "economic uncertainty" and a "tough housing market" indicates that the Trump administration's policies, while aimed at growth, haven't fully insulated sectors sensitive to interest rates and consumer discretionary spending. - The pivot towards "pro" customers is a defensive move, implying that DIY demand (a proxy for broader consumer confidence and disposable income for home projects) remains subdued. This might reflect consumer caution regarding non-essential spending in the face of persistent inflationary pressures and potential recession fears, even with the Trump administration's attempts at tax cuts or stimulus. How do the strategic acquisitions by Lowe's and Home Depot reflect a longer-term structural shift in the home improvement industry? - The focus on acquiring building materials distributors and design/installation services companies (such as Foundation Building Materials and Artisan Design Group) indicates the industry's recognition that the earlier DIY boom is not sustainable. The sector is pivoting towards capturing a larger share of the professional contractor market, which is less sensitive to transient consumer trends and more aligned with large-scale residential and commercial projects. - This shift implies higher barriers to entry for new competitors and a consolidation play among incumbents. It also suggests a potential change in pricing power and profit models within the industry, moving from reliance on high foot traffic and DIY product sales to larger contracts and specialized supply chain management, offering more stable revenue streams during uncertain economic times. Given the continued economic uncertainty and the incumbent Trump administration's pro-business stance, what are the potential risks and opportunities for investors in this sector? - Risks: While the Trump administration generally pursues pro-business policies, its trade policies could lead to increased costs for building materials, or its monetary policies could cause further interest rate volatility, potentially pressuring the sector. Furthermore, a prolonged housing market downturn might not be fully offset by professional business growth, even with strategic acquisitions. - Opportunities: Lowe's and Home Depot's strengthened professional segments through acquisitions present opportunities for investors via market consolidation and improved operational efficiencies. These companies could benefit from economies of scale and stronger bargaining power. Additionally, if the Trump administration's infrastructure spending plans gain traction, it could stimulate demand for professional building materials and services, offering upside potential for these transitioning retailers.