Lowe’s Profit Tops Estimates as Renovation Spending Thrivesby
Same-store sales gain of 7.3% beats larger rival Home Depot
Warm winter led homeowners to take on more remodeling projects
Lowe’s Cos. posted first-quarter profit that topped analysts’ projections, reinforcing the notion that Americans are still willing to spend on their homes.
Earnings last quarter were 87 cents a share, excluding some items, the Mooresville, North Carolina-based company said Wednesday in a statement. Analysts projected 85 cents, on average. Sales rose 7.8 percent to $15.2 billion, topping the average estimate of $14.9 billion.
Last week, retailers like Macy’s Inc. posted disappointing results, raising concerns that U.S. consumers are pulling back on spending. The home-improvement industry has been largely immune from the malaise, with rising property values encouraging people to spend on their dwellings. That trend helped larger rival Home Depot Inc. top expectations on Tuesday.
“Home-improvement spending trends remain robust in the U.S.,” Kate McShane, an analyst for Citigroup Inc., said in a research note. The strength is despite the “uncertainty” that has arisen in other retailing categories, she said.
Lowe’s said profit this year will be about $4.11 a share, including an 11-cent gain on a foreign-currency hedge. The company had previously projected profit of $4, and analysts’ had set their average estimate at that level. The company maintained its forecasts that revenue would gain 6 percent and comparable-store sales would rise 4 percent.
The shares rose as much as 4 percent to $79.08 in New York, the biggest gain in three months. Lowe’s was little changed this year through Tuesday.
Topping Home Depot
Sales at stores open for more than a year -- a key metric for investors -- rose 7.3 percent, topping analysts’ 4.3 percent prediction. Lowe’s said a warm winter led homeowners to take on more projects. That gain surpassed Home Depot’s 6.5 percent increase, marking only the second time since 2009 that Lowe’s has beaten its larger rival.
Lowe’s will get a boost in sales after buying Rona Inc., a Canadian home-improvement chain with about $4 billion in sales. The acquisition received approval from regulators earlier this month and was expected to close on May 20.
While retailers of many stripes have posted disappointing results, with discount giant Target Corp. describing current shopping trends as “volatile,” Lowe’s hasn’t seen a significant change in sentiment. Company surveys of consumers show discretionary spending levels staying constant over the past several quarters, but with more purchases going toward the home, Lowe’s Chief Executive Officer Robert Niblock said in an interview.
“It’s being driven by the fact they think it’s a good time to invest in the home,” Niblock said. “They feel confident in their local housing market.”
(A previous version of this story was corrected to fix Lowe’s forecast.)