By Deborah Mary Sophia and Praveen Paramasivam
(Reuters) -Lowe's Cos Inc on Wednesday warned of a hit to 2022 sales as Americans facing high inflation cut back spending on discretionary home goods including patio furniture and grills.
During pandemic lockdowns, homebound customers splurged on sprucing up their homes, but a return to old routines with lockdowns easing has strained sales of tools and paints.
However, with home prices higher and supply lower, Lowe's (NYSE:LOW) and rival Home Depot (NYSE:HD) expect customers to refrain from buying houses, and instead invest in repairs and other essential home-improvement projects.
Lowe's Chief Executive Marvin Ellison said on an earnings call a majority of U.S. houses were aging and required repair and renovation, while middle- and high-income households were sitting on over trillions of dollars of savings, setting the sector up for sales gains.
Lowe's said it expects earnings would be toward the top end of its prior range on strong demand from builders and handymen as well as its cost control measures, sending its shares up 2%.
"It appears Lowe's is baking in better DIY trends going forward, no doubt encouraged by recent performance cited by Home Depot," J.P. Morgan analyst Christopher Horvers said.
Lowe's has rolled out more self-checkout terminals and adopted a payroll model, allowing it to lower labor hours and costs, at a time when retailers are striving to protect their bottomline.
In the second quarter, comparable sales declined 0.3%, compared with the average Refinitiv estimate for a 2.4% increase, as a shorter spring led to a decline in spending on outdoor products from its core do-it-yourself (DIY) customers.
Lowe's expects 2022 sales would be toward the bottom end of its prior range. Home Depot, which brings in a smaller portion of its sales from DIY customers, on Tuesday maintained its forecasts after topping estimates for results.