Lowe’s shares rose Wednesday after the company reported better-than-expected earnings and raised its sales forecast as its attempt to win business among home professionals gained momentum and consumers tackled larger home projects.
The home improvement retailer expects sales of $ 92 billion this year, up from an earlier forecast of $ 86 billion.
The shares closed 9.59% on Wednesday at $ 199.73.
Lowe’s has seen sales grow over the past year as consumers bought new homes, renovated kitchens, and took on home improvement projects during the pandemic.
However, as consumers get vaccinated and become more mobile again, CEO Marvin Ellison said the retailer is seeing a change in the business. He said the kitchen, bathroom, flooring and appliances stay strong, but more customers shop on weekdays and spend the weekend back on vacation, in parks, or at social events.
He said home installs grew 10% and pro business grew 21% in the second quarter. The sale of home accessories was also a bright spot, he said.
Still, he said he remains confident that people will continue to spend on their homes – even as they juggle other spending priorities. Some have taken advantage of the low interest rates to buy a larger home or to expand their home. You’ve made more space to work remotely or finally embarked on a renovation project after housing values soared.
“The pandemic has had a long-term impact on the importance of the house and we just don’t see that change,” he said.
Here’s what the company reported for the second fiscal quarter ended July 30, versus Wall Street’s expectations, based on an analyst survey conducted by Refinitiv:
- Earnings per share: $ 4.25 versus $ 4.01 expected
- Revenue: $ 27.57 billion versus an expected $ 26.85 billion
Lowe’s profit rose $ 3.02 billion or $ 4.25 per share of $ 2.83 billion or $ 3.74 per share, a year earlier. The results surpassed what analysts surveyed by Refinitiv had expected to be $ 4.01 per share.
Net sales rose to $ 27.57 billion from $ 27.30 billion last year, exceeding analysts’ expectations of $ 26.85 billion.
The home improvement retailer has seen breathtaking growth every quarter. However, this has resulted in an almost inevitable decline in sales growth as consumers get back to the world and spend their money on other ways, from booking vacations to planning parties.
Lowe’s sales in the same store declined 1.6% for the quarter – the first drop in its top retail metric in more than eight years. That was a slightly stronger performance than expected, as analysts had predicted a decline of 2.2%, according to StreetAccount. US sales decreased 2.2% but increased 32% over a two year period.
For the same period last year, Lowe’s rolled out big numbers, including revenue growth of 35.1% in the same store and a nearly 69% increase in quarterly earnings.
Ellison said Lowe’s still sees growth opportunities. He said it will increase e-commerce sales, expand its turnkey installation service offering, add private label brands, and customize its range of goods to feel local in different stores.
Lowe’s has sourced more of its business from do-it-yourself customers in the past but is trying to attract home improvement with a new loyalty program and other perks. The home professionals, who range from painters to electricians, tend to be more frequent visitors and financiers.
About 25% of Lowe’s total sales now come from professionals versus about 45% from competitor Home Depot. Ellison said he would like that percentage to grow to 30% in the coming years.
Ellison, who leads the company’s turnaround, said Lowe’s will continue to focus on making higher profits through higher productivity. Lowe also plans to buy back at least $ 9 billion of its shares.
In its earnings report a day earlier, competitor Home Depot fell short of expectations for sales in the same store in the second fiscal quarter as some customers’ appetites for do-it-yourself projects waned. The company also declined to provide an outlook for the year, citing uncertainty about factors ranging from supply chain issues to the impact of the Delta option on consumer spending. Shares closed Tuesday 4.27% to $ 320.75.
Lowe’s shares closed 5.8% to $ 182.26 on Tuesday following Home Depot’s earnings report.
Read the company’s press release here.
Correction: A previous headline misrepresented sales growth in the same store. Sales in the same store were down 1.6% in the quarter.
