By Sabrina Escobar and George Glover

Lowe's stock was rising on Wednesday after the home-improvement retailer reported better-than-expected earnings for the first quarter.

This is breaking news. Read a preview of Lowe's earnings below and check back for more analysis soon.

Home Depot surprised markets Tuesday when executives said prices would stay unchanged despite higher tariffs, contrasting with retailers like Walmart, who have warned prices will increase in coming months.

Investors are now looking toward rival Lowe's earnings report -- scheduled for Wednesday morning before the market open -- to see whether home improvement might turn out to be a tariff haven, or if Home Depot is an outlier.

"We don't see broad-based price increases for our customers at all going forward," said Billy Bastek, Home Depot's executive vice president of merchandising on a call with investors Tuesday. "It's a great opportunity for us to take share and it's a great opportunity for our suppliers to take share as well."

Home-improvement retailers are generally better insulated to shifts in trade policy than other retailers, analysts say. Home Depot's announcement seemed to reaffirm that belief, with executives noting the company sourced more than 50% of its products from the U.S.

But the sector won't be completely immune. Home-improvement vendors, including Stanley Black & Decker, Whirlpool, Mohawk Industries, and Masco Corp., all indicated they may need to raise prices in the coming months to offset the tariff impact.

It's unclear if Lowe's will be able to emulate Home Depot's approach, or if it will be forced to go the Walmart route and warn consumers that price increases are coming. The company is smaller in size and scale than Home Depot is, putting it at a relative disadvantage when it comes to negotiating with vendors.

On the flip side, it might benefit Lowe's even more to keep prices lower. The retailer is more dependent on do-it-yourself customers, who might be more sensitive to price increases than professional contractors who potentially have more flexibility to absorb higher costs.

The challenge is that retail margins are often narrow, so few companies will be able to keep prices unchanged. Most retailers will likely absorb some of the tariff increase, or "eat the tariffs," as President Donald Trump has suggested. But as Walmart indicated Thursday, there's only so much these companies can take to avoid shrinking the bottom line too much.

Investors will be closely monitoring Lowe's earnings and management commentary for guidance when the company reports results Wednesday morning.

Wall Street expects Lowe's will post adjusted earnings of $2.88 a share on $20.9 billion in sales. Same-store sales are projected to decline by 2.1%, reflecting another quarter of weak demand for home improvement. People often renovate homes just before selling, or right after buying. Americans haven't been doing much of either over the past two years or so, as higher mortgage rates and home prices have kept potential buyers out of the market.

Home Depot's earnings fell short of expectations for the quarter. While revenue beat estimates, same-store sales declined 0.3% compared with the same period last year, slightly worse than the 0.1% decline analysts were predicting. Home Depot again indicated that spending by professional contractors outpaced do-it-yourself sales.

That doesn't bode well for Lowe's, which derives about 70% of its total revenue from DIY. Indeed, over the past four quarters, Home Depot's U.S. same-store sales have exceeded Lowe's sales by about 0.85 percentage points, on average, estimates Steven Shemesh, an analyst at RBC Capital Markets.

The company is aiming to remedy that. In April, it announced plans to acquire Artisan Design Group, a company that helps contractors design, deliver, and install interior finishes, such as flooring, cabinets and countertops.

Lowe's stock has fallen more than 6% so far this year.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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May 21, 2025 06:06 ET (10:06 GMT)

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