Lowe’s lowers yearly predictions due to weak demand for home improvement.

Lowe’s Cuts Annual Sales and Profit Forecasts as Demand for Home Improvement Goods Dwindles

Lowe’s Cos Inc has cut its annual comparable sales and profit forecasts due to dwindling demand for home improvement goods. The high inflation rate has forced consumers to cut back on discretionary spending, which has affected sales of tools, building materials, and appliances at home improvement chains. The North Carolina-based company also missed estimates for first-quarter comparable sales, causing shares to fall about 2% premarket.

The Impact of Inflation on Home Improvement Chains

Persistent inflation has squeezed household budgets across the U.S., prompting many consumers to pause remodeling projects around their houses. This trend has weighed on sales of home improvement goods, reinforcing a recent trend of U.S. consumers focusing on spending on essentials while pulling back on non-essentials. Larger rival Home Depot Inc and Target Corp have also reported grim forecasts, while Walmart Inc raised its expectations on a lift from groceries.

Struggles for Home Improvement Chains

Home improvement chains are also struggling as Americans prioritize travel, leisure activities, and other services instead of investing further in their houses. Additionally, a more than 60% slide in lumber prices has also pressured sales. A damp and delayed start to the Spring season in parts of the U.S. has also forced consumers to put off some projects.

Softer-Than-Expected Demand for Discretionary Purchases

Even as sales to “Pro-customers” were positive in the reported quarter, the company is bracing for softer-than-expected demand for discretionary purchases. Lowe’s makes roughly 75% of its sales to Do-It-Yourself (DIY) customers and the rest to Pro-customers, unlike Home Depot, where DIY accounts for roughly half of the customer base. Lowe’s now expects full-year comparable sales to fall between 2% and 4%, compared to a prior outlook of flat to down 2%. It also projected 2023 adjusted earnings between $13.20 and $13.60 per share, compared with $13.60 to $14.00 estimated previously.

Conclusion

Lowe’s results reflect the impact of inflation on the home improvement industry and the recent trend of U.S. consumers focusing on spending on essentials while pulling back on non-essentials. The struggles of home improvement chains are likely to continue as Americans prioritize travel, leisure activities, and other services instead of investing further in their houses.