Lowe’s Companies Inc (NYSE:LOW) headed lower in pre-market trade after the DIY retailer’s second quarter performance disappointed.
Despite the vibrant US housing market, which recently helped fellow home improvement giant Home Depot Inc (NYSE:HD) to a record second quarter, Lowe’s earnings and sales fell short of Wall Street expectations.
Full-year guidance lowered
The North Carolina-headquarter company also lowered its full-year profit guidance as it expects additional investment in marketing and customer service to pressurize margins.
For the three months August 4, Lowe’s reported earnings of US$1.57 a share (Q2 2016: US$1.37), below the US$1.61 analysts had been looking for.
Revenue came in at US$19.5bn, ahead of the US$18.3bn it generated last year but slightly behind analyst forecasts of US$19.53bn.
There was a small beat on the same-store sales front though, which climbed 4.5% year-on-year, slightly better than the 4.3% estimates.
That’s not a bad area to beat expectations in, as it removes the volatility of stores recently openly or closed.
In terms of full-year earnings, Lowe’s is now guiding for between US$4.20 and US$4.30 a share, below the US$4.62 analysts had been expecting.
Sales are still expected to rise by roughly 5% year-on-year, with sales at its established stores rising 3.5%.
Boss concedes results were below par
“While our results were below our expectations in the first half of this year, the team remains focused on making the necessary investments to improve the customer experience and drive sales,” said chairman, president and chief executive Robert Niblock.
“This includes amplifying our consumer messaging and incremental customer-facing hours in our stores which will put pressure on our operating margin.
“We believe this is the right strategy to more fully capitalize on strong traffic trends in what we believe is a supportive macroeconomic backdrop for home improvement.”
The stock was down 4.9% to US$75.82 in pre-market trade on Wednesday.