Shares of Lowe's (NYSE: LOW) fell as much as 6.1% on Wednesday, following the home-improvement retailer's second-quarter earnings report. At the time of this writing, the stock is down 5.5%.
Some investors may be taking a pessimistic view toward the stock on Wednesday because both revenue and adjusted earnings per share were lower than analysts were estimating. Lower-than-expected profitability, in particular, may be an investor concern, as the company focused on the "necessary investments to improve the customer experience and drive sales," explained Lowe's CEO Robert Niblock in the company's second-quarter earnings release. This included more aggressive marketing and customer-facing hours in its stores.
Lowe's adjusted EPS for its second quarter was $1.57. On average, analysts expected adjusted EPS of about $1.62.
In the near term, Lowe's expects its more aggressive marketing will pressure its operating margin. To this end, the company said it now expects its operating margin in fiscal 2017 to increase 80 to 100 basis points, down from a previous forecast for the key metric to jump by about 120 basis points.
Niblock believes the near-term pressure on Lowe's operating margin will help the company take advantage of a healthy market for home-improvement goods. "We believe this is the right strategy to more fully capitalize on strong traffic trends in what we believe is a supportive macroeconomic backdrop for home improvement," Niblock said.
For the full fiscal year, which ends on Feb. 2, 2018, Lowe's expects sales to climb 5% year over year.
10 stocks we like better than Lowe'sWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Lowe's wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 1, 2017