Shoppers wearing protective masks wait in line to pick up a store from Lowe’s Cos on Wednesday, May 20, 2020. To be entered in San Bruno, California, USA.
David Paul Morris | Bloomberg | Getty Images
Lowe’s announced on Wednesday that sales in the same store rose 28.1% in the fourth quarter as consumers spent more on home projects during the pandemic.
This is higher than the 22% growth forecast by analysts, according to StreetAccount. Despite the strong results, Lowe’s continues to believe sales could weaken as the pandemic eases.
Lowe’s shares rose 2.5% in premarket trading.
The company reported for the quarter ended Jan. 29, relative to Wall Street expectations, based on an analyst survey conducted by Refinitiv:
- Earnings per share: $ 1.33 adjusted versus $ 1.21 expected
- Revenue: $ 20.31 billion versus $ 19.48 billion expected
Lowe reported net income of $ 978 million, or $ 1.32 per share, for the fourth quarter compared to $ 509 million, or 66 cents per share, a year earlier.
Excluding items, the company earned $ 1.33 per share, beating the analysts polled by Refinitiv, which was forecasting $ 1.21 per share.
Net sales rose to $ 20.31 billion, beating analysts’ expectations of $ 19.48 billion.
Sales in its US stores were open for at least a year and online sales were up 28.6% for the quarter.
CEO Marvin Ellison said the company has seen high demand across the board. Sales increased 16% in all merchandising departments and more than 19% in all regions of the country. Online sales rose 121% in the quarter.
Lowe’s reiterated the prediction he made on an investor’s day in December. Chief Financial Officer David Denton had said home improvement product sales are likely to decline in 2021 as more people get Covid-19 vaccines and spend more time outside their homes.
He presented three scenarios for a robust, moderate or weak market. In a robust market, the retailer expects an adjusted base mix of 5% to 7% for home improvement demand in 2021. In a moderate and weak market, demand would likely decrease by 7% to 9% and 10% respectively.
Even in a weak market, Denton said, the retailer is ready to improve its operating margins. He said that since sales to do-it-yourself customers are moderate, they could gain a foothold with home professionals – a smaller segment of Lowe’s customer base, but one that is set to grow.
In its earnings report, Lowe’s said it spent more than $ 100 million in the fourth quarter and more than $ 900 million during the year on additional Covid-related compensation and benefits for employees. It said it spent nearly $ 1.3 billion on pandemic-related spending, including higher wages and business security measures during the fiscal year.
The company spent $ 3.4 billion on share buybacks and paid dividends of $ 452 million in the fourth quarter.
Rival Home Depot’s fourth quarter earnings also beat Wall Street’s expectations this week. The retailer reported strong demand for DIY project accessories, outdoor items like patio furniture and Christmas decorations as shoppers spend more time at home. However, there was no outlook for the year as it was uncertain how long the pandemic will last and what that means for consumer spending.
At the close of trading on Tuesday, Lowe’s shares were up nearly 35% last year. The company’s market value is $ 123.53 billion.
Read the full press release here.