Spring and summer usually bring about a sense of renewal, with homeowners choosing to revamp and rearrange their spaces, or taking on outdoor projects in the sun. But that isn't exactly what some of the most popular home improvement retailers in the U.S. saw happen this year. In fact, new data shows that Lowe's sales actually dropped in the last quarter, and the CEO is offering his own explanation as to why. Read on to discover why shoppers are abandoning Lowe's right now.
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Lowe's sales declined in its last quarter.
John Hanson Pye / ShutterstockIn an Aug. 22 press release, Lowe's Companies, Inc. released the financial results for its second quarter of the 2023 fiscal year. For the quarter, which ended on Aug. 4, the home improvement retailer brought in $25 billion in total sales. But as with many other retailers, that represents a drop from what it saw during the same quarter last year.
During the second quarter of the 2022 fiscal year, Lowe's reported $27.5 billion in total sales, reflecting a 1.6 percent decrease year over year.
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The CEO says consumers are pulling back in certain areas.
ShutterstockDuring an Aug. 22 earnings call with analysts, Lowe's CEO Marvin Ellison confirmed the sales decline, noting that consumer spending has become more reserved recently.
"Home improvement shoppers remain cautious with their spend, especially big-ticket discretionary purchases," Ellison said.
And at the Goldman Sachs Global Consumer Conference in New York on Sept. 13, the CEO reiterated that consumers are taking a more "cautious approach" to spending on big-ticket items, Yahoo Finance reported. This is particularly troublesome for Lowe's, as the DIY consumer drives 75 percent of its revenue.
"Whenever that DIY customer becomes cautious, specifically on big-ticket [purchases], it disproportionately affects us," Ellison explained.
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Shoppers are shifting their spending habits elsewhere.
iStockA major consumer change is hitting retailers like Lowe's hard. Shoppers have shifted their spending to the "experience economy," instead of spending on goods.
"We think the snapshot to date is a little choppy because ... that DIY customer is not only being impacted by inflation and in some regards interest rates, but they're also investing in more experiences, whether that's travel or whether it's concerts and other things that we're all re-engaging with coming out of the pandemic years," Ellison said at the Sept. 13 conference.
At the same time, the CEO said he expects that this shift in consumer spending habits will only be a "short-term phenomenon," and that things will return to normal in the long-term.
"We don't have a point of view as to when that inflection point happens, but we're expecting that pressure to remain for the balance of the year," Ellison noted. "We're hoping that when that pressure is removed and that customer regains their confidence, we're going to be well positioned to take share because we've made the investments."
There was growth in certain areas for Lowe's last quarter.
iStockShoppers are not abandoning Lowe's altogether just yet. As consumers pull back on big-ticket items, they are focusing their spending on "small repair and maintenance projects," Ellison told analysts.
During the earnings call, Bill Boltz, Lowe's executive vice president of merchandising, explained that the retailer was able to avoid sales dropping much further due to a "stronger-than-expected spring recovery."
"Lawn and garden was a standout category," he noted. "We saw an increase in smaller instant-gratification projects that improve outdoor spaces at an affordable price, like landscaping projects and pre-plotted plants."
According to Boltz, Lowe's also saw growth in sales in other categories, including rough plumbing, building materials, paint, and hardware.
