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Lowe’s Missed Its Q1 Earnings Estimates, Beat Revenue Estimates

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First-quarter performance

Lowe’s (LOW) reported its first-quarter results on May 22. For the quarter ending on May 3, the company posted revenues of $17.74 billion and outperformed analysts’ expectation of $17.66 billion. Lowe’s SSSG (same-store sales growth) was 3.5%, which beat analysts’ estimate of 3.2%. However, the company’s adjusted EPS was $1.22, which missed analysts’ expectation of $1.33 by 8.3%.

Lowe’s management blamed its lower gross margins on the convergence of cost pressure, the transition in its merchandising organization, and its unproductive legacy pricing tools and processes for its lower-than-expected EPS.

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YoY revenue growth

Lowe’s revenues rose 2.2% YoY (year-over-year) from $17.36 billion in the first of 2018. The overall SSSG of 3.5% drove the company’s revenues during the first quarter. However, the decline in the store count of 152 units offset some of the growth in the company’s revenues during the first quarter. By the end of the first quarter, Lowe’s operated 2,002 stores covering the retail selling space of 208.8 million square feet—compared to 2,154 stores covering 215 million square feet. For the first quarter, Lowe’s posted an SSSG of 4.2% in the United States and outperformed Home Depot (HD), which reported an SSSG of 3.0% on May 21.

EPS growth

For the first quarter, Lowe’s posted a diluted EPS of $1.31. However, removing unusual items, the company’s adjusted EPS was $1.22, which represents a rise of 2.5% from $1.19 in the first quarter of 2018. The company’s EPS growth was driven by revenue growth and lower weighted average common shares outstanding. However, the decline in net margins offset some of the increase in Lowe’s EPS. For the first quarter, the company’s net margins fell from 5.7% in the first quarter of 2018 to 5.5%.

In the last four quarters, the company has repurchased shares worth $3.11 billion, which lowered the weighted average common shares outstanding to ~797 million shares—compared to ~826 million shares in the first quarter of 2018.

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