Lowe’s Companies, Inc. (NYSE:LOW) recently reported third-quarter fiscal 2023 results, revealing a mixed performance with adjusted earnings surpassing expectations while both sales and earnings declined compared to the same quarter in the previous fiscal year.
Quarterly Highlights
The company’s adjusted earnings per share (EPS) of $3.06 outperformed the Zacks Consensus Estimate by a penny but represented a 6.4% decline from the third quarter of fiscal 2022. Net sales, totaling $20,471 million, reflected a year-over-year decrease of 12.8% and fell short of the consensus estimate of $20,974 million. Comparable sales (comps) for the quarter declined by 7.4%, driven by reduced spending on do-it-yourself (DIY) projects, partially offset by Pro customer comps. The actual comps decline of 7.4% exceeded the projected 4% decline for the quarter.
Gross profit dipped 11.9% year over year to $6,891 million, while the gross margin expanded by 36 basis points to 33.7%, surpassing the expected 10 bps margin expansion. Operating income increased to $2,696 million from $924 million in the previous year’s quarter, with the operating margin expanding to 13.2% from 3.9%.
Financial Snapshot
As of the quarter’s end, Lowe’s held $1,210 million in cash and cash equivalents, with long-term debt (excluding current maturities) amounting to $35,374 million and shareholders’ deficit reaching $15,147 million. The company generated $7,032 million in cash flow from operations during the first nine months of fiscal 2023, with capital expenditures totaling $1,344 million. Lowe’s anticipates capital expenditures of up to $2 billion for fiscal 2023.
During the reported quarter, Lowe’s repurchased 7.3 million shares for $1.6 billion and paid out dividends amounting to $642 million.
Operational Developments
In the fiscal third quarter, Lowe’s introduced a new store and three Lowe’s Outlet stores. As of November 3, 2023, the company operated a total of 1,746 home-improvement stores.
Outlook
Due to weaker-than-expected DIY sales, Lowe’s revised its fiscal 2023 outlook. The company now projects revenues of $86 billion, down from the earlier expectation of $87-$89 million and below the $97.1 billion reported in fiscal 2022. Comparable sales for fiscal 2023 are anticipated to decline by 5% year over year, compared to the previous guidance of -2% to -4%. The adjusted operating margin is expected to be 13.3%, slightly lower than the earlier prediction of 13.4-13.6%. Management anticipates EPS of $13.00, down from the earlier forecast of $13.20-$13.60, against earnings of $13.89 per share in fiscal 2022. The adjusted effective tax rate is expected to be approximately 25%.
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