(LOW 93.8496, +8.0996, +9.45% )
is up after the company missed first quarter estimates but reaffirmed its
outlook for the year.
First quarter sales grew 3% to $17.4 bln. Comparable store sales rose 0.6%, well below estimates of 3% growth. Lowe's said that prolonged unfavorable weather across the country led to a delayed spring selling season, impacting sales in outdoor categories and resulting in a 300 basis point (3%) headwind to comps. Same store sales grew 0.6% in February, 1.1% in March and 0.1% in April, but management said sales were up double digits so far in May.
Earning came in $0.02/share below estimates but grew 16% year/year to $1.19/share. Despite missing headline estimates, soft results were expected after Home Depot (HD) said almost the exact same thing one week ago.
Lowe's said it was pleased with sales to Pro customers. Mangement maintained its positive view on the macroeconomic outlook as household formation improves.
Lowe's reaffirmed guidance for fiscal 2019, including EPS of $5.40-5.50, total sales up 5%, comps up 3.5%, operating margin down 40 basis points (bps) with ten new stores. A slight tweak to sales (+100 bps) and margin (-10 bps) guidance was the result of adopting a new revenue recognition accounting standard.
Today's price action in LOW is interesting given Home Depot sold off in reaction to a similar/stronger report (HD didn't miss on the bottom line).
Former JCPenney (JCP) CEO Marvin Ellison will take over the reins in July. Lowe's has consistently under-performed its largest rival Home Depot (HD) during the cycle. Home Depot has averaged 6% comp sales growth over the last five years versus 4.4% for Lowe's. Mr. Ellison's task will be to improve operations and close the 3 turn earnings multiple discount to its rival.
Lowe's has a $77 bln valuation and trades at 17x EPS estimates. Home Depot has a $215 bln market cap and trades at 20x EPS because it is expected to do 51% more in sales this year with only 6% more stores.
- OUR VIEW
- LEARNING CENTER