01—Abstract
Summary
Summary of the 8-K filed August 20, 2024. Cited figures are marked; the original filing is the authoritative source.
Lowe's (LOW) reported second-quarter fiscal 2024 results for the quarter ended August 2, 2024, showing continued top-line and earnings pressure.
Net sales fell 5.5% to $23.6 billiona from $25.0 billion, and comparable sales declined 5.1%, driven by weakness in DIY big-ticket discretionary spending and unfavorable weather affecting seasonal and outdoor categories. Pro and online sales were positive, with Pro comps up mid-single digits. GAAP diluted EPS was $4.17 versus $4.56 a year earlier, a 9% decline; excluding a $43 million pre-tax gain tied to the 2022 sale of the Canadian retail business, adjusted diluted EPS was $4.10.
Gross margin contracted 19 basis points to 33.47%, and operating margin fell 96 basis points to 14.61% on an as-reported basis. Management cut its full-year 2024 outlook on lower-than-expected DIY sales and a pressured macro environment. Sales guidance was lowered to $82.7b–$83.2 billion from $84–$85 billion, comparable sales are now expected to decline 3.5–4.0% versus the prior -2% to -3%, adjusted operating margin is now 12.4–12.5% versus 12.6–12.7%, and adjusted diluted EPS is now $11.70–$11.90 versus $12.00–$12.30.
The guidance cut is the most important investor takeaway. Capital returns remained substantial, with about $1.0 billionc of buybacks (4.4 million shares) and $629 million of dividends in the quarter, though the company's balance sheet still carries a shareholders' deficit of $13.8 billion and total debt of roughly $36 billion.
02—Key points
Key Highlights
- Q2 net sales of $23.6B, down from $25.0B (about -5.5%); comparable sales -5.1%, with Pro comps up mid-single digits and online sales growth positive
- GAAP diluted EPS of $4.17 (down 9% YoY) included a $0.07 gain from the Canadian retail business sale; adjusted diluted EPS was $4.10
- Gross margin of 33.47% (down 19 bps) and operating margin of 14.61% (down 96 bps), with SG&A deleverage as sales declined
- FY2024 guidance cut: sales to $82.7–$83.2B (from $84–$85B), comps to -3.5% to -4.0% (from -2% to -3%), adjusted diluted EPS to $11.70–$11.90 (from $12.00–$12.30)
- Adjusted operating margin guidance lowered to 12.4–12.5% (from 12.6–12.7%); adjusted tax rate lowered to ~24.5% (from 25%)
- Shareholder returns in Q2 totaled about $1.6B ($1.0B buybacks of 4.4M shares plus $629M dividends); quarterly dividend per share rose to $1.15 from $1.10
- Balance sheet remains levered with a $13.8B shareholders' deficit and roughly $36B of total debt, with cash of $4.4B at quarter end
03—Questions
Frequently Asked Questions
Why did Lowe's cut its full-year 2024 guidance?
Management attributed the cut to lower-than-expected DIY sales, particularly bigger-ticket discretionary purchases, and a pressured macroeconomic environment that weighs especially on homeowners. Weather also hurt seasonal and outdoor categories in the quarter.
How much of the EPS decline was due to one-time items?
The reported $4.17 GAAP diluted EPS included a $0.07 benefit from a $43 million pre-tax gain on contingent consideration from the 2022 sale of the Canadian retail business. Excluding that gain, adjusted diluted EPS was $4.10, versus $4.56 a year earlier, so the underlying decline was roughly 10%.
Is Lowe's Pro business offsetting weakness in DIY?
Partially. Pro comparable sales rose in the mid-single digits in the quarter, and online sales growth was positive, with double-digit growth in online Pro. However, these gains did not offset the overall comparable sales decline of 5.1%, which was driven by DIY weakness.
Does Lowe's continue to return capital to shareholders despite weaker results?
Yes. In the quarter, Lowe's repurchased about 4.4 million shares for $1.0 billion and paid $629 million in dividends. Dividends declared rose to $1.15 per share from $1.10. Investors should note that buybacks and dividends are being funded against a shareholders' deficit and significant debt, and that the full-year guidance implies lower earnings to support these payouts.
04—Continue