Retail: Lowe's stock rises, BJ's Wholesale falls on earnings miss

Yahoo Finance Live's Akiko Fujita and Seana Smith discuss the latest from the retail sector, including Lowe's stock rising on an earnings beat, the decline in BJ's Wholesale shares, and the state of the consumer amidst the current economic slowdown.

Video transcript

- We are also watching retail today, two big names reporting earlier Lowe's and BJ's Wholesale and issuing separate warnings on the consumer. Lowe's shares posting gains as results beat expectations. But the company did lower its full-year guidance. CEO Marvin Ellison saying he expects shoppers to pull back on discretionary spending in the near term.

Meantime, BJ's Wholesale under pressure, results missed estimates and guided that current quarter same store sales are tracking below the first quarter. Let's start with Lowe's, [? Shannon ?] because in many ways, we heard what we heard from their competitor Home Depot last week. We talk about lumber deflation, unfavorable weather a big part of some of the pullback they saw. And I thought it was interesting as even though they're talking about a pullback in discretionary spending, you could argue Lowe's in more of a favorable position considering where they said, 2/3 of their sales is non-discretionary. And they are seeing some strength on the pro side of things as well as online.

- Yes, certainly. And it's also interesting when you take a look at the reaction that we're seeing in the stock today because taking into account the guidance that we got from Lowe's, that was not too impressive, yet we're seeing the move here higher of just about 2%. And I think that's largely based on the fact that it wasn't as bad as investors had feared following the results that we got from their competitor Home Depot yesterday or excuse me, last week.

But what we're really pointing to here is just this ongoing trend, the theme that it seems to be from retail earnings so far this season. That is the fact that company after company is calling out the conscious consumer. Those that are targeting cost-saving measures, larger box retailers, those have been the outperformers. Those that are more reliant on those staples purchases like Walmart-- Walmart was outperformed when you compare it to the results that we're getting here from Target in terms of how the company is positioned over the next several months in terms of the eyes of many of the analysts that are tracking these results.

And Jefferies was out with the notes today on the heels of the BJ's report saying that the company is well positioned to gain market share given the fact that consumers are hunting for bargains. They're going to the places that they have deals-- Walmart, one of those places. That's why a number of analysts are saying that they are also well positioned for this downturn if we do see it.

- Yeah, I mean, we have heard over and over in these earnings calls about value being the key for these consumers. And you could argue BJ's Wholesale kind of in that position when you think about where things have been on the membership side of things. Remember, they announced earlier that 90% membership renewal rate.

So that tells you where customers are looking right now. You could argue Costco, which we're going to hear from later on this week, another one of those names where they are seeing the value customer come back. I thought it was interesting, though, [? Shannon. ?]

We've been talking so much about trade downs and that being another sign of the conscious consumer, the cautious consumer. We did hear from BJ's saying their own brand sales growth in grocery divisions more than doubled that of the overall market during the quarter. So that to me sort of also points to where consumers are looking at their shopping, but they're also shopping for more value.

- They are. They're shopping for more value. And a lot of those higher income shoppers are now making that decision. We heard Walmart talk about that on the earnings call the fact that they now-- their customer base has been growing for quite some time given the current environment that we're in right now.

Now what they need to do is keep that new customer base. And we'll see whether or not they're able to do it. But certainly people are being driven when it comes to their purchases by the prices, and many of them favoring the staples over discretionary items, which did so well during the pandemic.