There's a classic scene in every war movie: the platoon advances, takes ground, but the grizzled sergeant looks at the horizon and says "don't celebrate yet." That's exactly what Marvin Ellison, Lowe's CEO, did this Wednesday.
The company dropped fourth fiscal quarter numbers that made Wall Street choke:
- Adjusted earnings per share: $1.98 (they expected $1.94)
- Revenue: $20.58 billion (they expected $20.34 billion)
- Same-store sales: +1.3% (they expected a measly +0.2%)
Total revenue jumped more than 10% year over year. Growth in 9 out of 14 product categories. Strong holiday season. E-commerce flying. Construction pros spending more on plumbing, windows, doors.
Damn, on paper it's champagne and fireworks.
Then came the cold shower
The guidance — that projection companies give for the full year — came in below what analysts wanted to hear. Lowe's said it expects adjusted earnings between $12.25 and $12.75 per share. The consensus was $12.95.
Result? Shares dropped more than 4% mid-session.
And this is where things get interesting.
Ellison didn't try to sugarcoat it. He didn't do that corporate theater of "we're optimistic about the opportunities ahead." The guy went straight for it: "We're dealing with a housing market that has zero tailwinds."
Persistent inflation. Economic uncertainty. Mortgage rates through the roof. And the so-called "lock-in effect" — that's when a homeowner looks at the 3% rate they locked in back in 2021, looks at today's 7%, and decides they're staying put, thank you very much.
The cycle nobody wants to admit
Think about it: the biggest fuel for the home improvement industry is when someone decides to sell their house. Because then they paint the walls, fix up the yard, replace the fence, give the kitchen a facelift. That's the moment Lowe's and Home Depot stuff their registers.
Except nobody's selling. And nobody's buying.
Home Depot itself, which released results the day before, told the same sad story. It's like the two biggest home improvement chains in the U.S. are screaming in unison: the American housing sector is locked up.
And meanwhile, the Twitter gurus — who've never hammered a nail into a wall — keep repeating that "the American consumer is resilient" and that "housing always bounces back." Sure it does. The question is when and at what cost.
What Lowe's is doing right
Credit where credit's due. While the market is going sideways, Lowe's isn't sitting around whining. The company:
- Improved its digital experience (e-commerce growing strong)
- Expanded flexible delivery options
- Invested heavily in installation services
- Focused on the pro customer (the guy who renovates for a living, not the weekend DIY warrior)
Ellison basically said: "The market's going to stay flat, but we're going to gain market share within that flat." That's the language of someone who knows the tide isn't rising anytime soon and is building the fastest boat.
The annual revenue projection of $92 billion to $94 billion represents 7% to 9% growth. For a supposedly stalled market, that's no small feat.
The message Wall Street doesn't want to hear
The market tanked the stock because guidance came in below consensus. Classic. The guy delivers above-expectations quarterly results, but because he dared to be conservative on the forward outlook, he gets beaten up.
You know what this reminds me of? That Buffett quote: "The market is a voting machine in the short term and a weighing machine in the long term."
Ellison called his projection "appropriately conservative" because of the "very fluid and very unpredictable environment" — read: tariffs changing every week and a housing market that looks like a mall parking lot at 3 a.m.
And honestly? I'd rather have a CEO who gives me the raw truth than one who sells dreams and delivers nightmares. Anyone with skin in the game knows that conservatism in guidance isn't weakness — it's survival.
The real question is this: if not even Lowe's, with strong results and competent management, can make Wall Street happy in a scenario like this, what exactly is the market pricing in for this sector?
Because either the analysts are living in a parallel universe where mortgage rates are going to magically plummet, or somebody's going to have to wake up to the reality that the American housing cycle is stuck — and there's no Fed that can unclog it overnight.
