Lowe's (LOW 72.32, -3.50) has slid 4.6% in pre-market after missing earnings expectations and issuing below-consensus guidance.
The specialty retailer reported below-consensus second quarter earnings of $1.57 per share on a 6.8% year-over-year increase in revenue to $19.50 billion, which was also shy of estimates.
Comparable sales grew 4.5% year-over-year. Through the first half of Lowe's fiscal year, comparable sales have grown 3.3%. Comparable sales in the U.S. increased 4.6% during the second quarter, outpacing the 3.4% increase that has been recorded for the first six months of the year. The company highlighted its July comparable sales, which increased 7.9% year-over-year.
The company noted that its efforts to strengthen advertising and customer service will put pressure on its operating margin; however, the shortfall is expected to be made up as the company capitalizes on strong traffic trends.
Lowe's operating margin improved by 98 basis points to 12.22% in the second quarter, while operating margin for the first half of 2016 checked in at 10.84%, down two basis points year-over-year.
Looking ahead, Lowe's expects that earnings for the full year will be between $4.20 and $4.30 per share, which is shy of current market expectations. Revenue for the full year is expected to grow 5.0% to $68.27 billion, which is also light relative to estimates. The company expects that comparable sales will have increased 3.5%. Operating margin is expected to increase by 80 to 100 basis points.