If Home Depot (HD-0.55%) raised eyebrows with its muted earnings Tuesday, Lowe’s confirmed the trend Wednesday. The slowdown in home sales is wrecking demand from the very top of the funnel, all the way down to retail chains.
Lowe’s, releasing results early Wednesday morning, reported Q1 earnings per share of $2.92, edging past expectations but only thanks to a tight grip on costs. Sales fell to $20.9 billion, down from $21.4 billion a year ago. Comparable sales dropped 1.7%, with execs blaming early spring weather, though Pro and e-commerce channels eked out mid-single-digit growth.
Just don’t mistake this beat for momentum. Lowe’s, which operates a mind-boggling 200 million square feet of retail space, reaffirmed its cautious full-year outlook, projecting flat to 1% comp sales growth and earnings between $12.15 and $12.40. That’s far from bullish guidance in what should be peak home improvement season.
With mortgage rates stuck around 7% and median home prices hovering above $400,000, new buyers are priced out, and existing homeowners aren’t selling, keen to hang onto their 3% loans. That means fewer kitchen renos, fewer appliance upgrades, and way more mulch-and-paint maintenance. Home Depot confirmed all this Tuesday with a 0.3% drop in overall comps and U.S. store sales that lagged inflation.
Together, Lowe’s and Home Depot paint a clear macro picture that big-ticket home improvement is stalling. Shoppers are holding back. In other words, the housing chill is real. And it’s spreading.
The U.S.’s tentative China trade deal only buys 90 days of relative calm. Consumer confidence is sliding, resumed student loan repayments are biting, and higher-income shoppers — once the cushion in slowdowns — are trading down fast. Target (TGT-0.70%), also on Wednesday morning, joined the list of beloved American brands waving the yellow flag.
In this environment, “better than expected” just means not falling apart yet, as Lowe’s stock price demonstrates this morning, rising 2% in premarket trading. That’s because for housing-linked retail right now, the ceiling is low — and it turns out the floors may need some work, too.
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