In the last quarter, shares of Lowe's (LOW) have declined nearly 15%. Year to date, the stock is down more than 8%. Why has this stock performed so poorly when housing is doing pretty well?
Lowe's poor performance goes back to mid-August, when the company reported a soft second quarter and lowered guidance for the rest of the year. Lowe's reported second-quarter earnings of $1.37 per share, 5 cents worse than the consensus estimate of $1.42. Revenue rose 5.3% to $18.26 billion, about $160 million less than expected. Same-store sales rose 2%. Analysts were expecting comps of 4.5%. (Last year, comps were 4.3%.) Second-quarter U.S. same-store sales were up just 1.5%.
On the conference call afterwards, management lowered fiscal 2017 guidance. The company expects earnings of $4.05, vs. the consensus estimate of $4.06. Investors were especially disappointed by the cut, because everybody had already come down from $4.11. Management raised revenue guidance to $65 billion from the previous guidance of $62.6 billion. Most of the increased revenue guidance comes from the 53 weeks in the fiscal year and the addition of 45 new stores (including 20 Orchard Supply stores and 12 stores in Canada). Lowe's expects same-store sales will be up 4% for the year. Management spent $1.2 billion on share repurchases.
The second quarter was a real disappointment, especially with a decent housing market and a strong do-it-yourself market. While Lowe's produced a 2% comp in the second quarter, Home Depot (HD) reported a 4.7% comp.