360° Coverage : Lowe's Mitigates Impact Of Harsh U.S. Winter, Strong Spring...

2 Updates

Lowe's Mitigates Impact Of Harsh U.S. Winter, Strong Spring Sales Expected

Feb 27 2014, 1:13pm CST | by

Home improvement retailer Lowe’s released its Q4 earnings results on February 26. Earnings for the quarter stood at $306 million, a gain of nearly 6.3%. Net earnings were propelled by top-line...

Filed under: news

 
 
 

30 weeks ago

Lowe's Mitigates Impact Of Harsh U.S. Winter, Strong Spring Sales Expected

Feb 27 2014, 1:13pm CST | by

Home improvement retailer Lowe’s released its Q4 earnings results on February 26. Earnings for the quarter stood at $306 million, a gain of nearly 6.3%. Net earnings were propelled by top-line growth as a result of the steady recovery in the U.S. housing market driving consumer appetite for home improvement products. The company’s net sales for the quarter stood at $11.66 billion, an increase of about 5.6% over Q4 2012.
/>

Lowe’s sales in spring are expected to be higher than usual as homeowners go about carrying out repair jobs due to the damage caused by the snow to driveways, roofs etc. The company expects comparable sales growth of approximately 4% and total sales growth of approximately 5% in 2014.

We have a $46 Trefis price estimate for Lowe’s stock, which will be revised shortly now that the earnings results are out.

See our complete analysis of Lowe’s here

Effect Of The Housing Market

The housing market recovery continued in October in the fourth quarter of 2013, spurred by strong consumer confidence and low mortgage rates but a slowdown occurred in November and December. New home sales rose were 463,000 in October, 445,000 in November and 414,000 in December. Sales of existing homes dipped compared to levels observed in Q2 and Q3. The reason that sales of new as well as existing homes are important for Home Depot is the spending on home improvement by new occupants.
/>

We had stated in our earnings preview note that the mixed nature of housing market data in the recent months is most likely an aberration due to unforeseen factors such as an unusually harsh winter season that slowed down business activity. Lowe’s management agreed that extreme weather conditions resulted in lower sales. The company said that it managed to respond quickly to weather conditions by fulfilling the demand for snow blowers, space heaters, heating fuels, snow shovels, ice melt and pipe fittings across the country. Even so, the harsh winter cost it about $100 million in sales. This translated to a loss of around 100 basis points as far the comparable sales growth rate is concerned. This figure could have been 4.9% instead of 3.9%. The gross margins, however, increased slightly as weather related sales contributed to higher margins.

Lowe’s’ management expressed the opinion that the housing market recovery will continue to benefit its sales in 2014. This is similar to what Home Depot said in its earnings conference call a day earlier. However, unlike Home Depot, Lowe’s didn’t offer detailed comments on how much it expects the housing market to grow or home prices to appreciate in 2014.

Quarterly Performance

Lowe’s net sales in Q4 2013 were around 5.6% higher year-over-year and reached $11.66 billion. The company’s comparable same-store sales (comps) increased by a healthy 3.9% over the previous year comparable quarter. This increase was driven by growth in the number of transactions as well as the ticket size of each transaction. Total transaction count increased by 4.4% and total average ticket increased 1.1% to $63.08. 
/>

Lowe’s also said that its ProServices business, which serves contractors and other professional customers, continued to perform very well. However, its relatively smaller share of this market in comparison to rival retailer Home Depot will ensure that the latter continues to outpace Lowe’s in terms of sales growth. Professional customers account for about 35% of Home Depot’s sales while the figure for Lowe’s is close to 25%. It is difficult for Lowe’s to catch up with Home Depot on this front because the latter has more stores in metropolitan areas where the professional customers are generally based.

Margins Remain Strong

Lowe’s gross margin was 34.67% for the quarter, up by 40 basis points from Q4 2013.

Lowe’s reported an improvement of approximately 40 basis points in gross margin due to value improvement. Margins also improved by due to a change in the product mix and lower inventory but this was essentially offset by markdowns necessary to clear seasonal product and the company’s proprietary credit value proposition.

In 2014, Lowe’s expects gross margins to continue improving. The company suffered an erosion in gross margins by 84 basis points in 2011 and 2012 and is seeking to regain 2010 levels. Beyond that it expects gross margins to remain flat.

We expect Lowe’s sales growth expectations to be revised upwards by 1-1.5% as 2014 progresses. If that does not occur, there will be a nearly 5% downside to our valuation.

See More at Trefis | View Interactive Bernstein Research (Powered by Trefis)/>/>

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
Update
2

4 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new co ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

4 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of t ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Acupuncture may not improve chronic knee pain
Sydney, Oct 1 (IANS) Among patients older than 50 years with moderate to severe chronic knee pain, acupuncture does not improve discomfort any more than "sham" acupuncture, says a new study.
 
 
OPEC daily basket price closes lower
Vienna, Oct 1 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $94.17 a barrel Tuesday, compared to $94.54 Monday, the OPEC Secretariat said.
 
 
New test for early cancer detection
London, Oct 1 (IANS) Early detection of cancer could now be as easy as a simple blood test.
 
 
Vitamin D has no link with type 2 diabetes: Study
London, Oct 1 (IANS) Challenging evidence from earlier studies, which suggest that higher concentrations of vitamin D might prevent type 2 diabetes, a study found that there is no evidence of a causal link between a person's vitamin D levels and type 2 diabetes.
 
 
 

Latest from the Network

Soumyajit wins, Sharath loses in Asiad TT
Incheon, Oct 1 (IANS) Soumyajit Ghosh advanced to the pre-quarterfinals of the men's singles table tennis event but compatriot Achanta Sharath Kamal lost his round of 32 match at the 17th Asian Games here Wednesday....
Read more on Sport Balla
 
Antioxidant in grapes may help treat acne
New York, Oct 1 (IANS) Resveratrol, an antioxidant derived from grapes and found in wine, can inhibit growth of the bacteria that causes acne, a new research shows. Researchers from the University of California Los...
Read more on Business Balla
 
Singapore man charged with attacking Indian-origin bouncer
Singapore, Oct 1 (IANS) A man was charged Wednesday with attacking a part-time Indian origin bouncer in a night club in Singapore. Mohamed Asrafd Peer Mohamed, 22, was accused of grievously hurting Prakash Jagajeevan...
Read more on Politics Balla
 
Viagra may have long-term effect on vision
Sydney, Oct 1 (IANS) An active ingredient in the erectile dysfunction drug Viagra could cause unusual visual responses in people who carry a common mutation that leads to an eye disease and may have long-term...
Read more on Business Balla
 
Smoking during pregnancy may damage fertility of sons
Melbourne, Oct 1 (IANS) Smoking during pregnancy can harm the developing foetus and mothers who smoke while they are pregnant or breast feeding may damage the future fertility of their sons. "This is the first time we...
Read more on Business Balla
 
Indian woman charged with fraud in Singapore
Singapore, Oct 1 (IANS) An Indian origin woman in Singapore Wednesday was charged with misappropriating a whopping $1.7 million from her former employer. Satwant Kaur during her tenure as secretary at Redstar Marine...
Read more on Politics Balla
 
Indian women's hockey team win bronze
Incheon, Oct 1 (IANS) The Indian women's hockey team defeated Japan 2-1 in the 3rd-4th position play-off to clinch the Asian Games bronze medal at the Seonhak Hockey Stadium here Wednesday. Vandana Kataria and...
Read more on Sport Balla
 
Fat tongue linked to sleep apnea risk
New York, Oct 1 (IANS) Obese adults with a significantly larger tongue and higher percentage of fat are more likely to develop obstructive sleep apnea than others, says a study. Common warning signs for sleep apnea...
Read more on Business Balla
 
New app to promote consensual sex
New York, Oct 1 (IANS) In a bid to solve cases of date rape and sexual assault on campus, here comes an app that makes consensual sex as easy as a flick of your finger. "Good2Go" is a free "consent" mobile phone app...
Read more on Politics Balla
 
Chimpanzees culturally connected to humans: Study
London, Oct 1 (IANS) Studying how new natural behaviour was passed among individuals in a wild chimpanzee community, researchers have shown that there could be an evolutionary connection between human and chimpanzee "...
Read more on Politics Balla