Lowe’s beat analysts’ expectations for fiscal third-quarter earnings on Wednesday, as the company got a bump in business from home professionals and online sales.
The home improvement retailer raised its forecast, saying it anticipates $95 billion in sales. It had previously predicted revenue of $92 billion.
The company’s shares rose more than 3% early Wednesday and touched a 52-week high of $255.22.
Here’s what the company reported for the fiscal third quarter ended Oct. 29 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $2.73 vs. $2.36 expected
- Revenue: $22.92 billion vs. $22.06 billion expected
Lowe’s profits rose to $1.90 billion, or $2.73 per share, from $692 million, or 91 cents a share, a year earlier. The results outmatched the $2.36 per share expected by analysts surveyed by Refinitiv.
Net sales climbed to $22.92 billion from $22.31 billion last year and were higher than analysts’ expectations of $22.06 billion.
Lowe’s same-store sales grew by 2.2% in the three-month period. That was a sharp difference from analysts’ prediction of a 1.5% decline, according to StreetAccount.
Focus on home pros
A strong housing market — and a wave of bigger projects — has lifted sales for Lowe’s and its rival, Home Depot. Even as prices rise for houses and construction materials, Americans have continued to buy. Homebuilder confidence surged this week, due to the big appetite for new single-family homes.
The retailers also saw customers shop for paint, throw pillows and more as they spent additional time at home and tackled do-it-yourself projects during the coronavirus pandemic.
As consumers get out and about again, Lowe’s and Home Depot are increasingly trying to woo the home professionals that homeowners hire to tackle renovations or redo their kitchens.
Home Depot’s third-quarter earnings reflected that shift, as customer transactions dropped but average tickets rose by 12.9% to $82.38. The retailer said momentum has continued into the fourth quarter, with sales starting slightly higher than third-quarter levels.
Under CEO Marvin Ellison, Lowe’s has stepped up efforts to attract pros, since they are steadier and bigger spenders. It has a loyalty program for pros and added perks like parking for larger vehicles, free phone charging stations and air stations for refilling tires.
Sales growth among pros outpaced the rate for do-it-yourself sales in the third quarter — a reflection of pandemic trends reversing. Comparable sales to pros rose over 16% in the third quarter and more than 43% on a two-year basis.
Consumer transactions declined 7.5% in the three-month period, as there were lower sales of smaller ticket, do-it-yourself customers and was a drop in lumber sales, Chief Financial Officer Dave Denton said on the earnings call.
Average ticket increased nearly 10% over the year-ago period as more consumers bought appliances and flooring and the price of some items like copper rose due to inflation, Denton said.
Digital sales jumped by 25% in the third quarter.
Lowe’s also said it plans to buy back $3 billion in shares in the fourth quarter, bringing total repurchases for the year to $12 billion. It bought back 13.7 million of its own stock for $2.9 billion during the latest quarter.
Tapping a new market
The retailer is also kicking off a new initiative, called Livable Home, to become a “one-stop shop” for baby boomers who want to age in place. It is training employees, adding resource guides and increasing inventory to cater to seniors who may have less mobility or want to add features to their homes for safety, such as grab bars in the shower. It launched the effort in collaboration with nonprofit AARP.
Ellison said that market represents about $32 million in sales.
In an interview with CNBC, Ellison said the idea was inspired by his own experience of trying to retrofit his father’s home with features like a walk-in bath tub and wheelchair ramp.
“Even as a CEO of a home improvement company, it was extremely difficult to get those things done,” he said. “It dawned on me that if my Dad is having these issues and I’m the CEO of a home improvement company, then the greater baby boomer population and caretakers must also have the same issue.”
Read the company’s press release here.