Why did Lowe's EPS fall so sharply in Q1 2024?

Diluted EPS fell to $3.06 from $3.77. About $0.10 of the prior-year figure came from a one-time gain on the 2022 sale of the Canadian retail business, so the adjusted decline was about 17%, from $3.67. The operating decline reflects lower comparable sales (down 4.1%), a 49 basis point gross margin contraction, and SG&A deleverage as expenses rose 4.8% on lower sales.

Is Lowe's growth in Pro and online sales offsetting DIY weakness?

Partially. Pro comparable sales were positive across all geographic divisions and online sales grew, but these gains did not fully offset the decline in DIY big-ticket discretionary spending, which drove the overall comparable sales decline of 4.1%. Management is pursuing its Total Home strategy and a national DIY loyalty program to support future growth.

How much of the Q1 sales decline was due to calendar or timing effects?

Management said Easter timing pressured March comparable sales by roughly 300 basis points and benefited April by a similar amount, because stores were closed on Easter. The timing shift largely reverses across the two months, so it affects the monthly trend more than the full quarter, but it does not explain the quarter's overall decline on its own.

How is Lowe's balancing shareholder returns with its balance sheet?

In Q1, Lowe's returned about $1.4 billion through $743 million in share repurchases and $633 million in dividends, funded by $4.26 billion of operating cash flow. Total debt is roughly $35.9 billion, and the company has a shareholders' deficit of $14.6 billion, a result of years of buybacks. Cash and short-term investments totaled about $3.5 billion at quarter end.

LOW 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 21, 2024. Cited figures are marked; the original filing is the authoritative source.

Lowe's Companies (LOW) reported first quarter 2024 results for the quarter ended May 3, 2024, showing net earnings of $1.76 billion^a and diluted EPS of $3.06, down 19% from $3.77 in the prior-year quarter.

The prior-year figure included a $63 million^b pre-tax gain from the 2022 sale of the Canadian retail business; excluding that gain, adjusted diluted EPS declined about 17% from $3.67. Total sales fell 4.4% to $21.4 billion, and comparable sales decreased 4.1%, driven by weakness in big-ticket DIY discretionary spending, partially offset by growth in Pro and online sales. Profitability compressed meaningfully.

Gross margin contracted 49 basis points to 33.2%, while SG&A deleveraged to 18.8% of sales from 17.1%, pushing operating margin down 229 basis points to 12.4%. Management highlighted positive Pro comparable sales across all geographic divisions and the national rollout of a new DIY loyalty program, along with expanded same-day delivery through partnerships with DoorDash and Shipt. Cash generation was strong, with operating cash flow of $4.26 billion^c versus $2.11 billion a year earlier, aided by higher accounts payable.

The company returned about $1.4 billion^d to shareholders through $743 million in buybacks and $633 million in dividends. Lowe's affirmed its full-year 2024 outlook, including total sales of $84-85 billion, comparable sales down 2-3%, an operating margin of 12.6-12.7%, and diluted EPS of approximately $12.00-12.30.

Investors should note that management attributed part of the quarter's softness to Easter timing, which pressured March by roughly 300 basis points and benefited April by a similar amount. The company also carries about $36 billion in total debt and a shareholders' deficit of $14.6 billion, a structure that is typical for Lowe's given its buyback history.

02—Key points

Key Highlights

Diluted EPS of $3.06 declined 19% year over year from $3.77; adjusted diluted EPS (excluding a $0.10 Canadian divestiture gain in the prior year) fell about 17% from $3.67.
Net sales of $21.4 billion decreased 4.4% from $22.3 billion, with comparable sales down 4.1% as DIY big-ticket discretionary spending weakened.
Operating margin contracted 229 basis points to 12.4%, and gross margin fell 49 basis points to 33.2%, with SG&A deleveraging to 18.8% of sales.
Pro comparable sales were positive across all geographic divisions, and online sales growth was positive, offsetting DIY weakness.
Full-year 2024 outlook affirmed: sales of $84-85 billion, comparable sales down 2-3%, operating margin of 12.6-12.7%, and EPS of approximately $12.00-12.30.
Operating cash flow more than doubled to $4.26 billion, supported by a $3.0 billion increase in accounts payable, while capital expenditures were $382 million.
Shareholder returns totaled about $1.4 billion in the quarter ($743 million in buybacks and $633 million in dividends), and the company operates 1,746 stores.

03—Questions

Frequently Asked Questions

Why did Lowe's EPS fall so sharply in Q1 2024?
Diluted EPS fell to $3.06 from $3.77. About $0.10 of the prior-year figure came from a one-time gain on the 2022 sale of the Canadian retail business, so the adjusted decline was about 17%, from $3.67. The operating decline reflects lower comparable sales (down 4.1%), a 49 basis point gross margin contraction, and SG&A deleverage as expenses rose 4.8% on lower sales.
Did Lowe's change its full-year 2024 guidance?
No. Management affirmed its full-year 2024 outlook, including sales of $84-85 billion, comparable sales down 2-3%, an operating margin of 12.6-12.7%, and diluted EPS of approximately $12.00-12.30. The company's Q1 results were in line with the expectations embedded in that guidance.
Is Lowe's growth in Pro and online sales offsetting DIY weakness?
Partially. Pro comparable sales were positive across all geographic divisions and online sales grew, but these gains did not fully offset the decline in DIY big-ticket discretionary spending, which drove the overall comparable sales decline of 4.1%. Management is pursuing its Total Home strategy and a national DIY loyalty program to support future growth.
How much of the Q1 sales decline was due to calendar or timing effects?
Management said Easter timing pressured March comparable sales by roughly 300 basis points and benefited April by a similar amount, because stores were closed on Easter. The timing shift largely reverses across the two months, so it affects the monthly trend more than the full quarter, but it does not explain the quarter's overall decline on its own.
How is Lowe's balancing shareholder returns with its balance sheet?
In Q1, Lowe's returned about $1.4 billion through $743 million in share repurchases and $633 million in dividends, funded by $4.26 billion of operating cash flow. Total debt is roughly $35.9 billion, and the company has a shareholders' deficit of $14.6 billion, a result of years of buybacks. Cash and short-term investments totaled about $3.5 billion at quarter end.

04—Continue

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