This time of year offers plenty of shopping opportunities, whether you're heading to Lowe's to buy supplies for a new outdoor garden project, or stopping by Costco to stock up on some summer essentials. This year, however, these two retailers are not seeing the sales bump they usually get in the spring, as both are reporting lower results in their recent financial reports. Read on to find out why shoppers are turning away from Lowe's and Costco, according to the newest data.
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Lowe's is experiencing a decline in sales.
iStockIn a May 23 press release, Lowe's revealed that it saw sales of $22.3 billion for the first quarter of the 2023 fiscal year. That's certainly not chump change, but compared to Lowe's earnings this same time period last year, it represents a 4.3 percent decrease in comparable sales for the chain.
For the first quarter of the 2022 fiscal year, the retailer brought in a total of $23.7 billion in sales—which was already a 4 percent decline from the same period the year prior. In 2021, Lowe's reported $24.4 billion in total sales for the first quarter.
Best Life reached out to Lowe's about its recent financial report, and we will update this story with their response.
Costco is also dealing with its own drop in sales.
Shutterstock / Ken WolterLowe's isn't completely alone in its recent decline, however. Costco released the financial results for its most recent quarter on May 25. Unlike the home improvement retailer, the wholesale retailer actually experienced a 0.3 percent increase in total comparable sales for the third quarter of its 2023 fiscal year.
But when narrowing down Costco's results to just its stores in the U.S., the company saw a decline as well. For the third quarter of the 2023 fiscal year, Costco's comparable sales in the U.S. dropped by 0.1 percent compared to the company's earnings for this same time period last year.
Best Life reached out to Costco about its recent financial report, and we will update this story with their response.
The retailers say shoppers are turning away in certain areas.
ShutterstockAccording to the Lowe's report, lumber deflation and unfavorable spring weather both contributed to its recent sales decline. But there was another unexpected factor that also played a major part in the drop: lower do-it-yourself (DIY) discretionary sales.
In a May 23 earnings call with investors, Lowe's CEO Marvin R. Ellison said that the company is specifically seeing a decrease in shoppers buying more costly, non-essential items for home improvement projects.
"Candidly, what we're seeing is pressure across the big ticket discretionary purchases, primarily. We're seeing some pressure in small ticket, but it's more pronounced in big ticket and it's almost exclusively discretionary at DIY," he said. "As you know, 75 percent of our business is penetrated in the DIY customer, and quarter one is our most discretionary quarter of the year because of all the seasonal purchases. So, when we run into, you know, timing of unseasonal weather, it has a disproportionate impact on our business."
During a May 25 earnings call, Costco CFO Richard Galanti revealed that the same problem is impacting its U.S. sales, as shoppers turn away from "bigger-ticket nonfood discretionary items." While Costco's sales decline is significantly smaller, the wholesale retailer is seeing a drop in purchases for "home furnishings, small electronics, jewelry and hardware," according to Galanti.
And they're buying in other areas instead.
Shutterstock / The Image PartyAs shoppers turn their spending away from things like home furnishings and electronics, they're putting their money toward other types of purchases. As the Wall Street Journal recently reported, people in the U.S. are starting to spend more of their budgets on activities outside the home as the pandemic phases out—driving success in sales for apparel brands like Urban Outfitters and Abercrombie & Fitch.
"They’re back at the office. They’re celebrating with their friends," Fran Horowitz, Abercrombie & Fitch's CEO, said on a recent call with analysts, per the WSJ. "They’re going out and we’re there and servicing them for all of those occasions."
This specific switch in shoppers' habits is what's helping Costco maintain sales numbers a bit better than more home improvement-focused retailers like Lowe's.
"We're getting people in the door, and we know what they're buying. They're buying nondiscretionary items. They're buying fresh foods. They're buying food and sundries," Galanti explained. "They're buying apparel in a big way. They're buying patio furniture now that the weather has turned in a big way; indoor furniture, not as much. We all know what's going on with consumer electronics out there."
