CHICAGO (Reuters) - Lowe’s Companies Inc (LOW.N) failed to launch spring discounts during the coldest months this year, while rival Home Depot Inc (HD.N) piled on marketing to storm-hit homeowners, and the two chains saw sharply different first quarter results.
Lowe’s missed earnings estimates during the first quarter, which is typically driven by promotions for home retailers, sending its shares down over 5 percent on Wednesday. A day earlier Home Depot topped expectations.
Lowe’s comparable sales underperformed that of Home Depot in two out of the three months in the first quarter. The second-largest home improvement chain had lower exposure to the Northeastern states, which were battered by winter storms and blizzards leading to widespread economic damage.
Home Depot capitalized on the storms and the winter months with better-timed promotions and saw its sales and profit beat expectations as customers spent more on home repairs after a harsh winter.
The two companies dominate the home improvement market and are seen as leading indicators for the health and revival of the U.S housing market.
“Home Depot did a pretty good job in offering quick promotions to stimulate people into buying during the winter months whereas Lowe’s clearly lost momentum there,” said Neil Saunders, chief executive at research firm Conlumino.
Explaining why Lowe’s sales were held back during the quarter, Lowe’s Chief Executive Robert Niblock told Reuters in an interview on Wednesday that some of the company’s spring promotions in stores were offered later than usual. In the face of the cold weather, it waited until the second quarter to launch promotions generally seen in the first.
“We felt that would give better returns on investment in advertising and marketing,” Niblock said.
He said Lowe’s is off to a strong start in seasonal category sales in the second quarter and will be able to achieve its full-year profit and sales outlook.
During the quarter, Lowe’s outperformed in home appliances, but saw muted sales in key spring categories like lawn and garden.
For example, Lowe’s launched a spring paint promotion with Sherwin Williams later than expected. Home Depot began its own marketing program for Behr paints earlier, winning customers, said Wedbush Securities analyst Seth Basham.
While Lowe’s predicts it can make up for lost sales in the current quarter, analysts say it may face a difficult time.
“This leaves little room for error, and as retail sales appear somewhat erratic to weak, this is likely to impact them going forward,” Janney Capital market said in a note.
Reporting by Nandita Bose in Chicago; Editing by Peter Henderson and Frances Kerry