Lowe's Companies Inc. (LOW) - Get Lowe's Companies Inc. Report posted modestly softer-than-expected third quarter earnings Wednesday, but a muted holiday season outlook sent shares sharply lower in early trading.
Lowe's said adjusted earnings for the three months ending on November 1 were pegged at $1.98 per share, a 40.4% increase from the same period last year but one penny shy of the Street consensus forecast. Group revenues, Lowe's said, rose 28.2% to $22.3 billion, topping analysts' estimates of a $21.25 billion tally.
Looking into the final months of the year, Lowe's said its sees comparable sales growth of between 15% and 20%, and adjusted earnings per share of between $1.10 and $1.20, compared to a Refinitiv forecast of $1.17 per share.
"Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions. and triple-digit growth online," said CEO Marvin Ellison. "We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores, making them easier to shop with improved product adjacencies, especially for Pro customers."
"Our omni-channel transformation continued in the third quarter with further investments in Lowes.com and our supply chain," he added. "I remain confident that we are making the right strategic investments to deliver sustainable, long-term growth. I would also like to thank our outstanding frontline associates for their unwavering commitment to customer service and safety."
Lowe's shares were marked 5.4% lower in late morni ng trading following the earnings release to change hands at $151.10 each, a move that still leaves the stock with a 31% gain over the past six months.
"The downside to our estimate was primarily driven by lower than expected gross margin improvement and higher spending on labor and investments, partially offset by stronger comps," said KeyBanc Capital Markets analyst Bradley Thomas.
"We raised our comp estimate to a Street high of 26.0% (on October 20), but highlighted our belief that even that estimate appeared to have upside potential. Since that time, Street expectations moved up meaningfully over the last month, and we believe investor expectations were for comps even higher," he added.