MW Lowe's CEO confident in retailer's ability to manage Trump tariffs after earnings beat
By Ciara Linnane
"We feel good about the processes and the systems we put in place since the first Trump administration, to manage tariffs," said Lowe's CEO Marvin R. Ellison
Lowe's stock was unable to hold early gains Tuesday, after the home-improvement retailer beat third-quarter estimates and raised its guidance, as softness in big-ticket items weighed against storm-related sales and positive same-store sales in its professional and online operations.
The company's stock is down 4.3%, compared with the S&P 500 index's 0.4% decline.
Lowe's Cos. $(LOW)$ had net income of $1.695 billion, or $2.99 a share, for the quarter, down from $1.773 billion, or $3.06 a share, in the year-earlier period. Adjusted for one-time items, EPS came to $2.89, ahead of the $2.82 FactSet consensus. The company recognized a $54 million pretax gain from the 2022 sale of the Canadian retail business, boosting EPS by 10 cents.
Sales fell to $20.17 billion from $20.471 billion a year ago, but were also ahead of the $19.939 billion FactSet consensus.
Same-store sales fell 1.1%, while FactSet was expecting a 2.7% decline.
"Our results this quarter were modestly better-than-expected, even excluding storm-related activity, driven by high-single-digit positive comps in Pro, strong online sales and smaller-ticket outdoor DIY projects," CEO Marvin R. Ellison said in prepared remarks.
During the conference call to discuss the results, Lowe's executives also discussed President-elect Donald Trump's proposal to impose new tariffs.
"It's very early, like everyone we're waiting to see what happens when the Trump administration actually takes office in January," said Ellison, in response to an analyst's question. "Having said that, we feel good about the processes and the systems we put in place since the first Trump administration, to manage tariffs, other challenges."
Bill Boltz, Lowe's executive vice president of merchandising said that the company has diversified its sourcing in recent years. "We have been working over the last few years with our supply partners and our private brand partners to diversify our products, and we will continue to do that," he said. "A big part of our playbook is to work closely with our suppliers to manage whatever comes our way."
"Definitely staying very close to this, we're preparing internally for what may be coming from the new administration," added Lowe's CFO Brandon Sink. "Roughly 40% of our cost of goods sold are sourced outside of the U.S. and that includes both direct imports and national brands through our vendor partners, and as we look at potential impacts, certainly would add product costs, but, you know timing and details remain uncertain at this point."
"Just as Bill said, we believe we're well prepared to respond when and if it does happen," he added.
Last week executives at Lowe's rival Home Depot Inc. $(HD)$ discussed the possible implications of Trump tariffs.
Lowe's also updated its guidance Tuesday. The company is now expecting full-year adjusted EPS of $11.80 to $11.90, compared with prior guidance of $11.70 to $11.90. It expects sales to range from $83 billion to $83.5 billion, compared with prior guidance of $82.7 billion to $83.2 billion.
Same-store sales are expected to be down 3% to 3.5%, compared with prior guidance of down 3.5% to 4%.
The FactSet consensus is for full-year EPS of $11.83, sales of $83 billion and for same-store sales to fall 3.8%.
The stock has gained 16.9% to date in 2024, while the S&P 500 has gained 23%.
Read on:
Home Depot earnings sweep past estimates, but interest rates pressure home remodeling
Trump tariffs loom over retail earnings as Home Depot points to 'industry-wide impact'
-Ciara Linnane
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November 19, 2024 10:25 ET (15:25 GMT)
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