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Lowe's (LOW) Q3 Earnings Beat Estimates, Sales Fall Y/Y
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Lowe’s Companies, Inc. (LOW - Free Report) posted mixed results in third-quarter fiscal 2023, with the top line missing the Zacks Consensus Estimate while the bottom line beat the same. However, both sales and earnings fell from the previous fiscal year’s quarterly readings.
This presently Zacks Rank #3 (Hold) player’s shares have lost 9.5% in the past three months compared with the industry’s 5% drop.
Quarter in Detail
Adjusted earnings per share (EPS) of $3.06 surpassed the Zacks Consensus Estimate of earnings of $3.05 per share but dipped 6.4% from the third-quarter fiscal 2022 tally.
Lowe's Companies, Inc. Price, Consensus and EPS Surprise
Net sales of $20,471 million decreased 12.8% year over year and came below the consensus estimate of $20,974 million. Comparable sales (comps) fell 7.4% in the quarter under review, driven by lower DIY discretionary spending, partly offset by Pro customer comps. We had projected a comps decline of 4% for the quarter under discussion.
Gross profit slipped 11.9% year over year to $6,891 million, while the gross margin increased 36 basis points (bps) to 33.7%. We had expected a gross margin expansion of 10 bps year over year. Operating income amounted to $2,696 million, up from $924 million recorded in the year-earlier quarter. Also, the operating margin expanded to 13.2% from the year-earlier quarter’s reported figure of 3.9%.
Other Financial Aspects & Developments
LOW ended the quarter with cash and cash equivalents of $1,210 million, long-term debt (excluding current maturities) of $35,374 million and shareholders’ deficit of $15,147 million.
Lowe’s generated cash flow from operations of $7,032 million for the nine months of fiscal 2023. Capital expenditures amounted to $1,344 million for the aforementioned period. For fiscal 2023, LOW expects a capex of up to $2 billion.
In the reported quarter, Lowe’s bought back 7.3 million shares for $1.6 billion and paid out dividends of $642 million.
In the fiscal third quarter, it introduced a store and three Lowe's Outlet stores. As of Nov 3, 2023, Lowe’s operated 1,746 home-improvement stores.
Outlook
For fiscal 2023, management revised the outlook on weaker-than-expected DIY sales. LOW now projects revenues of $86 billion versus $87-$89 million expected earlier and $97.1 billion delivered in fiscal 2022.
Comparable sales in fiscal 2023 are envisioned to be down 5% year over year versus the previous guided range of -2% to -4%. The adjusted operating margin is expected to be 13.3% compared with the earlier prediction of 13.4-13.6%. Management anticipates EPS of $13.00 versus the earlier forecast of $13.20-$13.60 for the fiscal year versus earnings of $13.89 per share earned in fiscal 2022. It envisions an adjusted effective tax rate of about 25%.
Solid Picks in Retail
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Gap and American Eagle Outfitters (AEO - Free Report) .
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 10.4% from the year-ago reported figure. ANF has delivered an earnings surprise of 724.8% in the last four quarters.
Gap, a renowned clothing retailer, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year EPS suggests growth of 280% from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO has delivered an average earnings surprise of 43.2% in the last four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 37.1% from the year-ago reported figure.
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Lowe's (LOW) Q3 Earnings Beat Estimates, Sales Fall Y/Y
Lowe’s Companies, Inc. (LOW - Free Report) posted mixed results in third-quarter fiscal 2023, with the top line missing the Zacks Consensus Estimate while the bottom line beat the same. However, both sales and earnings fell from the previous fiscal year’s quarterly readings.
This presently Zacks Rank #3 (Hold) player’s shares have lost 9.5% in the past three months compared with the industry’s 5% drop.
Quarter in Detail
Adjusted earnings per share (EPS) of $3.06 surpassed the Zacks Consensus Estimate of earnings of $3.05 per share but dipped 6.4% from the third-quarter fiscal 2022 tally.
Lowe's Companies, Inc. Price, Consensus and EPS Surprise
Lowe's Companies, Inc. price-consensus-eps-surprise-chart | Lowe's Companies, Inc. Quote
Net sales of $20,471 million decreased 12.8% year over year and came below the consensus estimate of $20,974 million. Comparable sales (comps) fell 7.4% in the quarter under review, driven by lower DIY discretionary spending, partly offset by Pro customer comps. We had projected a comps decline of 4% for the quarter under discussion.
Gross profit slipped 11.9% year over year to $6,891 million, while the gross margin increased 36 basis points (bps) to 33.7%. We had expected a gross margin expansion of 10 bps year over year. Operating income amounted to $2,696 million, up from $924 million recorded in the year-earlier quarter. Also, the operating margin expanded to 13.2% from the year-earlier quarter’s reported figure of 3.9%.
Other Financial Aspects & Developments
LOW ended the quarter with cash and cash equivalents of $1,210 million, long-term debt (excluding current maturities) of $35,374 million and shareholders’ deficit of $15,147 million.
Lowe’s generated cash flow from operations of $7,032 million for the nine months of fiscal 2023. Capital expenditures amounted to $1,344 million for the aforementioned period. For fiscal 2023, LOW expects a capex of up to $2 billion.
In the reported quarter, Lowe’s bought back 7.3 million shares for $1.6 billion and paid out dividends of $642 million.
In the fiscal third quarter, it introduced a store and three Lowe's Outlet stores. As of Nov 3, 2023, Lowe’s operated 1,746 home-improvement stores.
Outlook
For fiscal 2023, management revised the outlook on weaker-than-expected DIY sales. LOW now projects revenues of $86 billion versus $87-$89 million expected earlier and $97.1 billion delivered in fiscal 2022.
Comparable sales in fiscal 2023 are envisioned to be down 5% year over year versus the previous guided range of -2% to -4%. The adjusted operating margin is expected to be 13.3% compared with the earlier prediction of 13.4-13.6%. Management anticipates EPS of $13.00 versus the earlier forecast of $13.20-$13.60 for the fiscal year versus earnings of $13.89 per share earned in fiscal 2022. It envisions an adjusted effective tax rate of about 25%.
Solid Picks in Retail
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Gap and American Eagle Outfitters (AEO - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 10.4% from the year-ago reported figure. ANF has delivered an earnings surprise of 724.8% in the last four quarters.
Gap, a renowned clothing retailer, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year EPS suggests growth of 280% from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy). AEO has delivered an average earnings surprise of 43.2% in the last four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year EPS suggests growth of 37.1% from the year-ago reported figure.