Lowe’s (LOW) earnings Q4 2020 beats estimates

Lowe’s mentioned Wednesday its fourth-quarter same-store gross sales climbed 28.1%, as shoppers spent extra on residence tasks throughout the pandemic.

That is greater than the 22% development that analysts anticipated, in response to StreetAccount. Even with the sturdy outcomes, Lowe’s continues to count on that gross sales might average because the pandemic eases.

Lowe’s shares have been down almost 3% early Wednesday.

This is what the corporate reported for the quarter ended Jan. 29 in contrast with what Wall Avenue was anticipating, primarily based on a survey of analysts by Refinitiv:

  • Earnings per share: $1.33 adjusted vs. $1.21 anticipated
  • Income: $20.31 billion vs. $19.48 billion anticipated

Lowe’s reported fourth-quarter internet revenue of $978 million, or $1.32 per share, up from $509 million, or 66 cents per share, a 12 months earlier.

Excluding objects, it earned $1.33 per share, exceeding the $1.21 per share anticipated by analysts surveyed by Refinitiv.

Internet gross sales rose to $20.31 billion, outpacing analysts’ expectations of $19.48 billion.

Gross sales at its U.S. shops open a minimum of a 12 months and on-line grew by 28.6% within the quarter.

CEO Marvin Ellison mentioned the corporate noticed excessive demand throughout the board. Its gross sales grew 16% in all merchandising departments and greater than 19% in all areas of the nation. On-line gross sales grew by 121% within the quarter, he mentioned.

Lowe’s reiterated the forecast it gave at an investor day in December. Chief Monetary Officer David Denton had mentioned residence enchancment gross sales will possible decline in 2021 as extra individuals get Covid-19 vaccines and spend extra time exterior their houses.

He laid out three situations for a strong, average or weak market. In a strong market, the retailer’s outlook for 2021 anticipates a 5% to 7% drop in demand for the house enchancment sector on a combination adjusted foundation. In a average and weak market, demand would possible drop respectively by 7% to 9% and 10%.

Even in a weak market, Denton mentioned, the retailer is poised to enhance its working margins. He mentioned as gross sales average with do-it-yourself prospects, they could choose up with residence professionals — a smaller a part of Lowe’s buyer base, however one which it is trying to develop.

Jefferies analyst Jonathan Matuszewski mentioned he’s betting on the corporate’s sturdy market state of affairs. He mentioned extra shoppers have gotten snug with taking over do-it-yourself tasks, a sample they’ll possible repeat. The agency provides Lowe’s a purchase ranking, with a goal worth of $207. That may signify a 20% achieve from the place shares are at present buying and selling.

He pointed to trade surveys, which report that greater than 20% of respondents that did DIY tasks final 12 months used a drill for the primary time. The survey additionally mirrored a extra balanced mixture of men and women prospects taking over the tasks.

“We consider the entry of recent People into the world of DIY tasks builds the case for Lowe’s as they lap difficult comparisons in F’22,” he mentioned within the analysis word. “Moreover, we expect traders underappreciate the sense of accomplishment DIYers felt from newly-acquired expertise throughout the pandemic and what that suggests for propensity to sort out future (extra advanced) tasks.”

Fading pandemic tendencies might take a look at whether or not Lowe’s has lasting loyalty amongst its newer prospects, too.

Neil Saunders, managing director of GlobalData, mentioned shoppers are beginning to return to previous habits, like going to shops they like as a substitute of ones which might be nearer or extra handy. As that occurs, he mentioned Lowe’s might lose some customers to bigger retailer and competitor, Dwelling Depot.

Dwelling Depot’s fourth-quarter earnings additionally surpassed Wall Avenue’s expectations this week. The retailer reported sturdy demand for DIY challenge provides, out of doors objects like patio furnishings and vacation decor as customers spend extra time at residence. Nonetheless, it didn’t present an outlook for the 12 months, saying it wasn’t positive how lengthy the pandemic will final and what meaning for client spending.

Each retailers are more likely to see greater prices for so long as the well being disaster lasts. In its earnings report, Lowe’s mentioned it spent greater than $100 million within the fourth quarter and greater than $900 million for the 12 months on extra Covid-related pay and advantages for workers. It mentioned it spent almost $1.3 billion in pandemic-related bills, together with greater wages and retailer security measures within the fiscal 12 months.

The corporate mentioned it spent $3.4 billion on share buybacks and paid $452 million in dividends within the fourth quarter. 

As of Tuesday’s shut, Lowe’s shares have been up almost 35% over the previous 12 months. The corporate’s market worth is $123.53 billion.

Learn the whole press launch right here.

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