Lowe's (LOW) 3Q 2022 revenues

Lowe’s said Wednesday that high inflation was not hurting sales as it reported third-quarter earnings that beat Wall Street expectations.

The company also raised its forecast for its full-year earnings. Shares of Lowe’s rose 3% on Wednesday.

Company executives said Wednesday they were confident in Lowe’s business, despite macroeconomic pressures, as they saw customers continue to increase discretionary spending and a strong quarter for the professional and DIY segments.

Lowe’s now expects full-year profit of $13.65 to $13.80, up from $13.10 to $13.60. The home improvement retailer also lowered the high of its revenue outlook to around $97 billion to $98 billion for the full year. The previous high was $99 billion. The company had said in August that it expected sales to be at the lower end of the range. Lowe’s also cut its forecast for comparable sales flat or down 1%, from earlier in the year when it expected a 1% decline to a 1% increase.

Chief Executive Marvin Ellison said on Wednesday’s earnings call that the company has chosen to be cautious about its sales outlook.

“There are a lot of unknowns out there, we’re not going to be overly optimistic for no reason,” Ellison said. “We had a midterm election that still wasn’t quite decided, aggressive Fed action, and global geopolitical events that happened. We’re reasonably conservative.”

Here’s what Lowe’s reported on Wednesday relative to analyst expectations, based on an analyst survey by Refinitiv:

  • Earnings per share: $3.27 vs. $3.10
  • Revenue: $23.48 billion vs. $23.13 billion

Turnover increased by 3% compared to the same period last year.

“We don’t see the negative impacts of inflation,” Ellison said in an earlier interview with CNBC on Wednesday, adding instead that customers have been spending money to renovate and trade in for better products.

Ellison said the tough housing market and rising interest rates haven’t affected Lowe’s clientele, noting that many homeowners in the United States have fixed interest rates or have paid off their mortgages and are not are unaffected by Fed increases. He added that many homeowners have seen their home’s equity rise, prompting them to invest and renovate.

“There’s a confusion between residential construction and home improvement,” Ellison said.

Customers showed no slowdown in discretionary spending due to inflation, indicating strong sales of Halloween decorations and a strong start to the holiday season, executives said.

The company said its profits were driven by 19% growth in its professional segment and its DIY sales improved. Lowe’s added that its website sales increased by 12%.

Ellison said on a call with investors Wednesday that the third quarter was his best showing for the DIY segment. “This customer segment tends to be the indicator for us of the overall health of our business,” Ellison added.

Lowe’s earnings report comes a day after Home depositThird-quarter earnings beat analysts’ estimates. On Tuesday, Home Depot said its professional and DIY sales saw positive growth during the period, adding that professionals said their backlogs remained strong.

On Tuesday, Home Depot executives noted the company was “navigating in a unique environment” and were unable to predict how rising costs and other pressures were affecting its customers. The company said that while customer transactions were down, ticket prices were higher due to inflation.

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