The selloff in Lowe's ( LOW) shares on Monday may portend bigger problems for rival Home Depot ( HD).

Lowe's shares dropped more than 7% in morning trading after the company reported its first-quarter earnings. Lowe's met the high end of its own earnings guidance and topped analysts' earnings expectations. But its sales came in lower than the company or analysts had projected.

The focus on sales may bode poorly for Home Depot, which reports Tuesday and whose sales performance has been lagging Lowe's amid a turnaround effort.

"If these guys are struggling, Home Depot will be struggling," said one fund manager who asked not to be named. "I suspect Home Depot will be doing really poorly."

Lowe's reported on Tuesday that it earned $421 million, or 53 cents a share, in its quarter ended May 2. On a per-share basis, the company's earnings were up 20% from the year-ago period, when the retailer earned $346 million, or 44 cents a share.

Overall, Lowe's sales grew 11% year over year to $7.21 billion in the quarter. But on a same-store basis, which compares results of outlets open more than one year, sales increased 0.1% year over year.

Lowe's had projected that it would post earnings of 51 to 53 cents a share in the quarter. But the company expected 15% overall sales growth on a 2% to 4% increase in comparable-store sales.

Lowe's topped analysts' earnings estimates by 1 cent but missed its revenue target by about $200 million, according to Thomson First Call.

That revenue miss likely spooked investors, said analysts.

"The Street had them at 2% comps. That was a pretty unrealistic expectation," given what other retailers have reported, said the fund manager. Given the poor weather in the first quarter and the war, "these are decent results," the fund manager said.

But investors weren't in a forgiving mood Monday morning.

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