Lowe's shares declined 10% on Wednesday, as higher costs are balanced by the first-quarter earnings, which were not analysts' estimates, and encouraged the home improvement deal to reduce its forecast for the year.
Lowe's been in a transitional period when CEO Marvin Ellison was signed up to the retailer less than a year ago. The company tries to improve its operations, but the investments weigh on the profits. But the lower forecast obviously worried investors and asked for sales. Stocks were recently down to nearly 12%.
How the company understood compared to what Wall Street expected according to Refinitive Consensus estimates:
- Earnings per Share: $ 1.22 adjusted, versus $ 1
- Turnover: $ 17.74 billion USD 17.66 billion USD estimated
- Same store sales: 3.5% higher than 3.2% estimated
"Our first-quarter comparable sales service is a clear indication that the consumer is healthy and our focus on retail base is drawing," Ellison said. a business solution. "The unexpected effect of the convergence of cost pressures, the significant transition in our merchandising organization and ineffective inheritance pricing tools and processes led to a gross margin contraction in the quarter that affected earnings."
Lowe's net income rose to $ 1.05 billion or $ 1.31 per. share from $ 988 million or $ 1.19 a year ago.
Lowe's earned $ 1.22 per. share, far below the analysis of $ 1.33 per share. share, predicted according to Refinitiv.  Ellison said the surplus was hit by cost increases, giving its gross margins of 90 basis points and unprecedented levels of changes in its merchandising operations.
"We're still in the early stages of our transformation, and with the changes we make, we expect to deliver improved gross margin performance over the year's balance," Ellison said.
Revenue increased 2.2% to $ 17.74 billion, which peaked analysts' estimate of $ 17.66 billion. Online sales increased by 16% in the last quarter, the company says.
Chuck Grom from Gordon Haskett Research Advisors applauded Lowes to ramp up his top line. The effort to gain market share in the home improvement room while increasing productivity explains the weaker margins, he said in a note to customers Wednesday.
In the same quarter, Lowe's sales at the same store increased by 3.5%, which was better than the estimate of 3.2%. The same store revenue growth in the US was even higher, up 4.2%.
CFO David Denton said Lowe's sales in the same store fell 4.1% in February, an increase of 3.5% in March and an increase of 7.2% in April. In the domestic market, Lowe's sales in the same store fell by 0.9% in February, an increase of 4% in March and an increase of 8% in April.
"This is the first quarter of a while that Lowes clearly collected Home Depot," said Oppenheimer's Brian Nagel on Wednesday at the CNBC's Squawk Box.
Lowe's results come just one day after the leader in space Home Depot reported better than expected result in the first quarter on Tuesday. Strong results at Lowe's rival came in spite of the second wettest February weather in American history and a deflation in timber costs. Home Depot confirmed its indicative 2019 guide.
For the tax rules in 2019, Lowe's estimates estimate that total sales will increase by 2%, while the same venture sales are expected to increase by 3%.
Lowe expects net fiscal revenue 2019 to be in the range of $ 5.54 to $ 5.74 per share. On an adjusted basis, it will earn between $ 5.45 and $ 5.65 per. Share.
Last quarter, Lowe said it expected to earn between $ 6 and $ 6.10 per day. Share on revenue growth of about 2%. It predicted that sales at the same store would increase around 3% in fiscal policy 2019.
Despite the lower forecast and earnings error, Nagel was optimistic about the results.
"I think when the dust clears this, it will be positive. The market says that Lowe has been understeer for a very long time, they have figured out what to do, they start to see the result in Better sales, there are just extra investments to be made here in the short term, "he said.
On Tuesday's market, Lowe's market value was DKK 88.4 billion. dollars, with shares rising more than 20% since the beginning of the year. Home Depot, with a market share of approx. DKK 211.1 billion Dollars are more than 11% year to date.
Correction: Leader of Lowe is Marvin Ellison. An earlier version celebrated its name.