Lowe’s (LOW) do-it-yourself (DIY) customers are changing their spending habits, favoring experiences over home improvement projects, according to statements from the company’s CEO, Marvin Ellison.
Speaking at the Goldman Sachs Global Consumer Conference in New York City, Ellison noted a notable shift in consumer behavior, citing a more “cautious approach” to spending on significant purchases. He attributed this change to a heightened desire for post-COVID experiences such as travel and live events.
The recent quarter’s financial report revealed a decline in same-store sales by 1.6%, and revenue slightly below estimates at $24.9 billion. Falling lumber prices and reduced spending on discretionary items further impacted Lowe’s earnings.
Lowe’s emphasized the significance of DIY customers, attributing 75% of its revenue to this segment, while the remaining 25% is driven by its Pro business.
Ellison pointed out that when the DIY customer exhibits caution, particularly regarding high-value purchases, it disproportionately affects Lowe’s. This change mirrors a broader trend among major retailers, who are cautioning investors about diminishing discretionary spending.
Bank of America analyst Jessica Reif Ehrlich highlighted the resurgence of consumer demand for live entertainment as a key factor in this shift. She noted a surge in interest, driven by pent-up demand for experiences post-pandemic.
Ehrlich underlined that this trend is being primarily propelled by younger generations, the millennial and Gen Z demographic, which are gaining prominence in the workforce with increased incomes and wealth.
Although Ellison acknowledged the current shift in consumer behavior as a “short-term phenomenon,” he anticipates that normalized demand will eventually return. He indicated that this pressure is likely to persist throughout the remainder of the year.
Looking ahead, Lowe’s remains optimistic about the medium and long-term outlook. Ellison expressed confidence that once this pressure subsides and customer confidence is restored, Lowe’s will be well-positioned to gain market share due to strategic investments made by the company.
CFO Brandon Sink provided further insights during an investor call, projecting a 2% to 4% sales decline for 2023. He attributed this to the continued impact of reduced DIY discretionary purchases, offset by strength in the Pro business and online sales.
Despite the shift in consumer behavior, Lowe’s is experiencing positive momentum on Wall Street, with shares up by 15% year-to-date. In contrast, its competitor, Home Depot (HD), has seen a more modest increase of 3.5% in share value over the same period.
Source: Yahoo Finance
