Lowe’s Home Improvement Chain Misses Sales Estimates, Nothing A little Investment Won’t Fix

Home improvement chain Lowe’s reported a modest second-quarter earnings results falling slightly short of what analysts had expected. Indeed, the company had to lower its outlook for the full year in anticipation that they may have to invest more in marketing and services for customers in stores; something that will definitely hurt margins.

According to GlobalData Retail Managing Director Neil Saunders, “The company ends the first half some way below where it expected to be,” in a note to clients. He goes on to say, “Although compared to many retailers, Lowe’s results are very positive, in the context of the home improvement market they are below par.”

The company had reported results pretty close to what analysts had estimated. This includes earnings of $1.57 per share, adjusted from a forecast profit of $1.61 per share. It also includes revenue of $19.50 billion, slightly lower than the $19.53 estimate. It also included same-store sales improving by 4.5 percent, which is slightly higher than the estimated 4.3 percent.

But the home improvement retailer thinks it has found a solution: increasing hours for store workers to improve customer service. Lowe’s CEO Robert Niblock comments, “While our results were below our expectations in the first half of this year, the team remains focused on making the necessary investments to improve the customer experience.” He also adds, “This includes amplifying our consumer messaging and incremental customer-facing hours in our stores.”
Of course, this means that they will likely have to sacrifice some profit for the sake of growth and stability. Indeed, it often makes more sense to spend a little money on paying higher wages and providing more hours, especially in this retail environment.

At the same time, Lowe’s also reported plans to add at last 25 new home improvement and hardware stores this year. Saunders makes sure to add, “Despite the addition of more services and brands for the pro-shopper and a good marketing effort, we still feel that Lowe’s is behind Home Depot when it comes to both visibility and success with this increasingly important group of customers.”

Finally, he notes, “We also have concerns around profit as Lowe’s will inevitably need to spend more on marketing, and perhaps invest more in price, if it is to win customers as it comes into the fall and winter seasons.”

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