The sluggish home improvement backdrop brought on by high interest rates hammered Lowe's (LOW) second quarter P&L.

Lowe's reported on Tuesday that quarterly sales tanked 5.6% from the prior year to $23.59 billion, falling short of estimates.

"We're all aware that we have an environment of elevated interest rates and inflation, and because of that, the DIY customer is just on the sidelines waiting for some form of an inflection to take place," CEO Marvin Ellison said on the Q2 earnings call.

Same-store sales — a key measure of retailer performance — fell 5.1%, more than the expected decline of 4.43%. The company called out "continued pressure" in bigger ticket do-it-yourself projects like flooring and kitchen and bathroom renovations. It also said said poor weather impacted seasonal and outdoor sales.

The result was worse than the 3.3% decline rival Home Depot (HD) reported a week ago for the quarter.

While DIY customers make up roughly 75% of Lowe's business, the company said it saw positive same-store sales in its Pro and Online businesses. Its adjusted earnings per share came in at $4.10, beating estimates of $3.97.

This marks the seventh straight quarter of sales declines for the home improvement retailer.

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Lowe's subsequently lowered its full-year 2024 outlook after being under pressure in the first half of its year.

It now expects to end the year with total sales of $82.7 billion to $83.2 billion, lower than the previously expected $84 billion to $85 billion. Same-store sales are forecast to drop 3.5% to 4%, worse than the 2% to 3% year-over-year decline previously forecast.

Jefferies analyst Jonathan Matuszewski said this guidance cut was "widely anticipated" and "appropriate given the choppy macro environment."

With homeowners and would-be buyers waiting for interest rate cuts from the Federal Reserve, both Lowe's and Home Depot find themselves at precarious points in their businesses.

Home Depot's second quarter also marked the seventh straight quarter of negative sales growth. US same-store sales were down 3.6%.

Both foot traffic and the average ticket size dropped by 1.8% and 1.3%, respectively.

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Similar to Lowe's, Home Depot also took a more cautious tone on full year sales guidance.

Comparable sales are set to decline between 3% and 4% for the fiscal year, worse than the 1% drop previously expected.

Home Depot said that while comparable sales for the company aren't currently "on the trajectory" to decline 4%, that "implies incremental pressure on consumer demand."

Soft results from home improvement suppliers, including Stanley Black & Decker (SWK), Floor & Decor (FND), and Tractor Supply (TSCO), "solidify" concerns on the space, said Telsey Advisory Group's Joe Feldman.

"I think the housing market has suffered from tight monetary policy and from a high level of mortgage rates, much higher than what we've been seeing for many years prior to the 2023 hiking cycle," Goldman Sachs chief economist Jan Hatzius said on Yahoo Finance's Morning Brief.

Added Hatzius, "I think housing is still soft. We saw that in the housing starts numbers last week. We've been seeing it in the homebuilders index. However, I would expect that to gradually improve as interest rates come down."

In a note to clients, TD Cowen analyst Max Rakhlenko wrote, "Attention will soon turn to the shape of potential recovery starting in fiscal year 2025 with Lowe's DIY business in good position to see a solid snapback, while Pro should continue to take share."

Ellison said Lowe's is prepared to take advantage of the recovery and gain market share once DIY shoppers are back.

Shares of Home Depot and Lowe's have each lagged the S&P 500 by 18 percentage points over the last year, according to Yahoo Finance data.

Here's what Lowe's reported for the second quarter, compared to Wall Street estimates, based on Bloomberg consensus data:

• Revenue: -5.6% year over year to $23.59 billion, compared to $23.9 billion estimate

• Adjusted earnings per share: -10.1% year over year to $4.10, compared to $3.97 estimate

• Same-store sales growth: -5.1% compared to 4.43% estimate

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at [email protected].

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