Lowe's sees hit to annual sales as inflation hinders demand

© Reuters. FILE PHOTO: FILE PHOTO: Shoppers load a box of merchandise into a truck after visiting a Lowe's hardware store in Philadelphia, Pennsylvania, U.S. November 4, 2020. REUTERS/Mark Makela/File Photo/File Photo

(Reuters) - Lowe's (NYSE:LOW) Cos Inc warned of a hit to annual sales on Wednesday after reporting a surprise drop in quarterly comparable sales, as demand for tools and paints eased from pandemic highs due to rising inflation and office reopenings.

Still, the home improvement chain said it expects its 2022 per share profit to be at the top-end of its outlook range of $13.10 to $13.60, thanks to tighter cost control and steady demand from professional builders, sending its shares up about 4% in premarket trading.

During the COVID-19 lockdowns last year, Lowe's benefited from people taking up home renovation projects, but a return to pre-pandemic work routines and higher inflation have hampered spending on such projects.

"Our results in the first half were disproportionately impacted by our 75% DIY (do-it-yourself) customer mix," Lowe's Chief Executive Marvin Ellison said.

The downbeat sales figures are in contrast to better-than-expected results from bigger rival Home Depot Inc (NYSE:HD), which said on Tuesday demand from both professionals and DIY customers held up during its second quarter.

Lowe's posted a surprise drop of 0.3% in second-quarter comparable sales, while analysts on average were expecting a 2.4% increase, according to Refinitiv IBES data.

The company forecast full-year total sales toward the bottom end of its range of $97 billion to $99 billion, and also expects comparable sales in the lower end of its prior expectations for a 1% decline to a 1% rise.

However, the company posted a profit of $4.67 per share in the second quarter ended July 29, surpassing estimates of $4.58, owing to a drop in costs. Selling, general and administrative expenses as a percentage of sales was 16.2% for the quarter, compared with 17% last year.