Lowe’s Stock Is Falling. Solid Earnings Weren’t Enough.

The company affirmed its outlook for 2022 revenue of $97 billion to $99 billion, and earnings of $13.10 to $13.60 a share.

Lowe’s (ticker: LOW) shares fell 4.4% in premarket trading Wednesday to $186. Investors are comparing the results to those from

Home Depot

(HD), which raised its guidance Tuesday after reporting stronger-than-expected earnings.

Lowe’s total sales in the first quarter were $23.7 billion, compared with $24.4 billion a year ago. Comparable-store sales dropped more than expected, falling 4%, with comparable U.S. sales decreasing 3.8%.

The company expects comparable sales for the year to range from a 1% decline to a 1% increase.

Shares of Lowe’s and Home Depot have fallen this year for two key reasons: the broader market selloff and worries that consumers are losing interest in fixing up their homes. And the fear that demand has dropped, or is softening, is justified given that the pandemic reopening is now solidly underway, red-hot inflation, and rising mortgage rates.

But factors outside the housing market, which has seen indications of cooling, affect home improvement as well. Those external drivers popped up in Home Depot’s last quarterly results, with comparable sales rising—despite consensus estimates calling for a small decline—and up on a three-year prepandemic basis as well.

Home Depot’s professional business was a standout in the quarter, but Lowe’s relies more on do-it-yourself customers. In general, pros are still working through backlogs of projects, while do-it-yourselfers have pulled back because of higher costs. The disparity in consumer types was pronounced in Lowe’s results, which showed sales to pro consumers were up 20% in the first quarter.

Moreover, Lowe’s foot traffic dipped more than Home Depot’s in March and April, compared with prepandemic 2019 readings, according to data for Placer.ai.

So while Lowe’s earnings were better than expected, sales roughly in line with forecasts, lower same-store sales than expected, and management’s reiteration of its financial forecasts weren’t enough to lift the stock today. There are two big reasons.

First, Home Depot’s quarter was markedly better in terms of comparable sales and because management increased its forecast. Second, sentiment about retailers is generally sour following a slew of disappointing results.

The fact that Lowe’s didn’t raise its guidance despite a decent quarter shows that it too is cautious about the coming quarters, which may feel the pinch of factors affecting other retailers.

Write to Teresa Rivas at teresa.rivas@barrons.com