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Citi downgrades Lowe’s stock over concerns in home retail

Yahoo Finance Live's Brian Sozzi discusses Citi downgrading Lowe's stock.

Video transcript

BRIAN SOZZI: Yeah, let's stay on retail here. Another one to mention is home improvement retailer Lowe's. Citi analyst Steven Zaccone downgrading the retailer to neutral, citing concerns of a weakening macro backdrop, paired with slowing do-it-yourself consumer demand and rising promotional risk. I have the full story on this downgrade now on the Yahoo Finance home page, so do read it and send it all over social media.

But look, I love this call by Steve. It takes brass ones to make a call like this ahead of the corporate earnings. Steve stepping up here with an ahead of the curve downgrade on Lowe's, which could show a lot of the weakness we are seeing in housing.

And existing home sales under pressure, remodeling activity under pressure. Lowe's also doesn't have a lot of exposure to contractors as compared to Home Depot. And that market appears to be holding up well. I like this downgrade on Lowe's. It makes a heck of a lot of sense to me.

BRAD SMITH: Yeah, and even after we're taking a look at the comparison between the two, I mean, Lowe's versus Home Depot, I mean, both of them have been struggling. Year to date, Home Depot is down by about 23%. It does come back to where some of those contractors are able to do their comparison shopping. And for home improvement, particularly on the DIY side, both of these companies have been trying to maintain that DIY customer, bringing them into stores, making more of that kind of product finding that much more easy.

But particularly here, what jumped out to me was what you mentioned, the risk of a second quarter miss on same store sales, because if you look across the categories, and specifically for Home Depot, even as people are looking to make sure that in a hybrid work environment, they have what they need for the home, it was a far different equation.

This time last year, we were talking about this earlier with Sonos as well. The spending looked far different, and so how does that start to decelerate and impact a Lowe's or a Home Depot in this near term, an interim period of time, and impacting, again, the forecast, or at least how the analysts are calling some of the forecasts.

BRIAN SOZZI: Yeah, and all the signs have pointed that this downgrade was coming. I wouldn't be surprised to see some downgrades on Home Depot. Look what we have heard, Brad, the past few weeks. A disappointing quarter from Whirlpool. CFO Jim Peters coming on our network saying, look, we're more cautious. We're pulling out our recession playbook. More cautious there. You've seen weak results out of Weber, weak results out of Traeger.