Lowe's shares fell 10% on Wednesday, when higher costs weighed their taxable earnings in the first quarter, which went out of analysts' estimates, and asked the home retailer to reduce the forecast for the year.
Lowe has been in a transitional period since CEO Marvin Ellison came to the dealer less than a year ago. The company is trying to improve its business, but its investments weigh on profits. But the lower forecast apparently worried investors and led to a downturn. Stocks were recently down to almost 12%.
How the company did, compared to what Wall Street expected, according to Refinitive Consensus estimates:
- Earnings per share: $ 1.22 adjusted, versus $ 1.33 estimated
- Revenue: $ 1
- Same store sales: up 3.5%, up 3.2% estimated
"Our first-quarter comparable sales development is a clear indication that the consumer is healthy and our focus on retail knowledge is on retreating, "Ellison said. a corporate solution. "The unexpected effect of the convergence of cost pressures, significant transition in our merchandising organization and inefficient inheritance pricing tools and processes led to gross margin contraction in the quarter that affected earnings."
Lowe's net profit rose to $ 1.05 billion or $ 1.31 per share, from $ 988 million or $ 1.19 per share a year ago.
Due to Lowe's earned $ 1.22 per share, well below $ 1.33 per stock analyst, according to Refinitiv, it predicted.  Ellison said the profits were damaged by cost increases, driving the gross margins by 90 basis points, and unprecedented levels of change in their merchandising operations.
"We're still in the early stages of our transformation, and with the changes we put in place, we expect to deliver improved gross margin development over the year's balance sheet," Ellison said.
Revenues rose 2.2% to $ 17.74 billion, peaking analysts' estimates of $ 17.66 billion. Net sales increased by 16% in the quarter, the company says.
Chuck Grom from Gordon Haskett Research Advisors applauded Lowe to ramp up his top line. Attempts to gain market share in the refurbishment, while increasing productivity, explain the weaker margins, he said in a note to clients Wednesday.
In the same quarter, Lowe's sales at the same store increased 3.5%, which was better than the estimate of 3.2%. The same store growth in the US was even higher, an increase of 4.2%.
CFO David Denton said Lowe's sales in the same store were down 4.1% in February, up 3.5% in March and up 7.2% in April. Domestically, Lowe's sales in the same store were down 0.9% in February, up 4% in March and up 8% in April.
"This is the first quarter of a time that Lowes clearly performed Home Depot," said Oppenheimer's Brian Nagel on the CNBC's Squawk Box Wednesday.
Lowe's results come just one day after the manager in room Home Depot reported better than expected results in the first quarter on Tuesday. Strong results at Lowe's rival came despite the second wettest February weather in American history and a deflation in timber costs. Home Depot confirmed its fiscal 2019 guidance.
For tax rules in 2019, Lowe's total sales are estimated to increase 2%, while the same store sales are expected to increase 3%.
Lowe expects net financial income for 2019 to be in range of $ 5.54 to $ 5.74 per share. On an adjusted basis, it will earn between $ 5.45 and $ 5.65 per share.
Last quarter, Lowe said it would earn between $ 6 and $ 6.10 per share on revenue growth of about 2%. It predicted that sales with the same store would increase by about 3% in fiscal policy in 2019.
Despite the lower forecast and earnings error, Nagel was concerned about the results.
"I think when the dust clears this up, it will be positive. The market should say that Lowe has been understaffed for a very long time, they figured out what they need to do, they start to see the results in better sales, There are only extra investments that need to be made here in the short term, he says.
In Tuesday's market close, Lowe's market value was $ 88.4 billion, with stocks up over 20% since the beginning of the year. About $ 211.1 billion has increased more than 11% so far so far.
Correction: Leader of Lowe is Marvin Ellison, an earlier version misstated his name.