Lowe's Expects Steady Second Half as Homeowners Shift to Smaller Projects

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Lowe's Companies expects the second half of the year to resemble the first half, as elevated interest rates and economic uncertainty keep homeowners cautious about big-ticket spending, Chairman, President and Chief Executive Officer Marvin Ellison said at the Goldman Sachs Global Consumer and Retail Conference. Ellison said the company does not expect a material change in the housing backdrop for the rest of the year, but believes it can grow and gain market share regardless of macroeconomic conditions, pointing to five consecutive quarters of positive comparable sales growth and digital sales growth exceeding 15% in each of the past two quarters. More than 60% of Lowe's sales come from do-it-yourself customers, and while its core homeowner customer has an average household income above $100,000 and roughly $400,000 in equity, those consumers are favoring smaller, more deliberate projects such as countertops or cabinets over full kitchen or bathroom renovations. Lowe's estimates the home-improvement market at roughly $1 trillion, with Lowe's and its largest competitor together accounting for about $250 billion of that total, leaving smaller regional players as another opportunity for share gains. The company's acquisitions of ADG and FBM have expanded it into construction-related markets, and about 55% of FBM revenue comes from commercial construction, including data centers, sports venues, hotels and university projects. Looking ahead, Lowe's plans to prioritize debt reduction toward a 2.75-times leverage ratio, which it expects to reach around the midpoint of next year, while continuing dividend payments and potentially revisiting share repurchases after hitting that target.

Impact on stocks 1

Consumer Discretionary▲ · 1 stocks
Lowe's Companies Inc
LOW
± MixedDemandrelevance

Lowe's expects a steady second half with cautious homeowners favoring smaller projects, though it cites five straight quarters of positive comparable sales growth and market-share gains.

Off-coverage companies 2

Foundation Building MaterialsPrivate▲ Positive
Demandrelevance

Lowe's acquisition of FBM expanded it into construction-related markets, with about 55% of FBM revenue from commercial construction including data centers and sports venues.

Artisan Design GroupPrivate▲ Positive
Capitalrelevance

Lowe's acquisition of ADG expanded the company into construction-related markets.

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