Consumer home spending remains cautious. Lowe's Companies, Inc. (LOW.US) 2025 fiscal year outlook falls short of market expectations.

The latest financial report and performance outlook released by the American interior decoration product retailer Lowe's Companies, Inc. (LOW.US) on Wednesday local time showed that the company's projected annual sales and earnings per share are basically in line with the weak forecast announced by its main competitor Home Depot, Inc. (HD.US) the day before, suggesting that the stagnant trend in the home decoration industry will continue until 2025 due to the Federal Reserve's long-term maintenance of high interest rates and sustained high inflation causing middle and low-income consumers to focus more on non-essential consumer goods. Despite the weak performance outlook, the stock price of this home product retailer based in Morrisville, North Carolina, USA rose by 3% in pre-market trading in the US mainly because the company's same-store sales in the fourth quarter unexpectedly increased by 0.2%, compared to the Wall Street analysts' average expectation of a 2% decrease. After hurricanes wreaked havoc, the surge in demand for related products like water tanks, floor renovations, generators, and various cleaning supplies became key drivers of home product demand. In the past two years, high mortgage rates and rising house prices, as well as high refinancing costs, have suppressed the demand for home improvement and renovation, leading to a sluggish market in the home decoration industry with sharply declining demand. Economic data released on Tuesday showed that US consumer confidence in February experienced the largest decline in three and a half years, further confirming the concerns of American people about the potential economic impact of the Trump administration's tariff policies. In addition, consumers' inflation expectations are continuously deteriorating. These latest economic data, combined with rising CPI and PPI, suggest a resurgence of inflation in the US, and the increasing possibility of "stagnation inflation" in the US, undoubtedly exacerbating the continuous deterioration of consumers' demand for American home products and all non-essential consumer goods. While the pace of economic expansion in the US slowed to near stagnation levels in February, the US Composite PMI dropped from 52.7 in January to 50.4, hitting a new low in 17 months. More pessimistic data shows that the vast service sector activities, crucial for the US economy, shrank for the first time in over two years, with a preliminary service PMI of 49.7, entering the contraction zone, significantly lower than 52.9 in January, hitting a new low since January 2023. In terms of inflation, both the January CPI and PPI exceeded expectations, with long-term inflation expectations of US consumers reaching the highest level in nearly 30 years. The latest inflation expectations released by the University of Michigan for February showed that US consumers' 5-10 year inflation expectations reached 3.5%, the largest month-on-month increase since May 2021, and the highest level since 1995. Respondents expressed widespread concerns that an increase in tariffs by Trump would lead to price increases, all contributing to the recent surge in "stagnation inflation" expectations in the US. In the unfavorable macro environment of the US economy being mired in "stagnation inflation" expectations, this retailer stated that DIY home improvement projects such as flooring, and kitchen and bathroom renovations are facing sales pressure in the near term, with these projects accounting for about 70% of its annual revenue. The quarterly performance as of January 31 showed that the recovery in demand from professional contractors partially offset the sustained weakness in DIY consumer spending, but the full-year guidance suggests that the recovery momentum in performance has not yet stabilized. In terms of the latest performance expectations, Lowe's Companies, Inc. expects same-store sales for the full fiscal year of 2025 to remain flat or increase by only 1%, compared to the Wall Street analysts' general expectation of 1.13% growth. The company predicts that earnings per share for the full fiscal year of 2025 will be in the range of $12.15-12.40, lower than the analysts' general expectation of $12.49. Despite the quarterly data showing a contrary upward trend, the cautious annual outlook still reveals structural sales pressure in the home decoration industry.