Lowe's Profit Tops Estimates, Showing Homeowners Still Spending

  • Third-quarter sales and profit surpass analysts' estimates
  • Americans keep spending on their homes amid rising values

Lowe’s Cos. followed larger rival Home Depot Inc. in posting third-quarter profit that topped analysts’ estimates, showing consumers remain willing to spend on sprucing up their houses.

Profit in the three months through Oct. 30 was 80 cents a share, Mooresville, North Carolina-based Lowe’s said Wednesday in a statement. Analysts projected 78 cents. Revenue rose 5 percent to $14.4 billion, surpassing analysts’ $14.3 billion average estimate.

Lackluster results at department stores and mall chains in recent weeks raised concern that Americans had slowed spending ahead of the all-important holiday-shopping season. Home Depot poked a hole in that theory on Tuesday when its sales topped estimates, driven by almost four years of rising real estate prices that have kept shoppers buying home-improvement products. Even as it lags behind its larger rival on some measures, Lowe’s has benefited from the same trends while also managing to keep expenses in check and widen its profit margins.

“Results point to very good execution,” Seth Sigman, an analyst for Credit Suisse Group AG, said in a research note. Investors should be getting more comfortable with Lowe’s in “an increasingly challenging retail landscape.”

Lowe’s rose 0.9 percent to $73.48 on Wednesday, pushing its gain for the year to 6.8 percent.

Net income in the quarter rose 26 percent to $736 million. The company maintained its forecasts that profit would be $3.29 a share this year and sales would gain 4.5 percent to 5 percent.

Same-Store Sales

Same-store sales increased 4.6 percent. While that beat analysts’ average projection for a 4.1 percent gain, it trailed Home Depot’s 5.1 percent advance. Home Depot, the world’s largest home-improvement chain, also said it would meet the top end of its annual profit and revenue forecasts.

Investors soured on U.S. retailers in the past two weeks after weak results from department-store operators like Macy’s Inc. and Nordstrom Inc. The Commerce Department only added to the malaise after saying that sales at U.S. retailers rose 0.1 percent during the third quarter, which trailed the median forecast of economists surveyed by Bloomberg.

Yet the strength of the housing market has kept retailers who cater to homeowners going strong. TJX Cos. posted third-quarter earnings on Tuesday that topped estimates, benefiting from better-than-estimated sales at its HomeGoods stores.

Home prices in 20 U.S. cities rose at a faster pace in the year ended August, a sign the industry continues to strengthen on improving demand. The S&P/Case-Shiller index of property values climbed 5.1 percent from August 2014 after rising 4.9 percent in the year ended in July, the group said last month.

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