Lowe's (LOW 106.19, +1.16, +1.10%) is trading modestly higher today after reporting Q4
(Jan) earnings results this morning. Non-GAAP EPS rose 8% yr/yr to $0.80, which
was slightly better than expected. Revenue rose 1.0% yr/yr to $15.65 bln, which
was basically in-line. With respect to comps, they came in at +1.7% overall and
US comps were +2.4%. That's a sequential improvement from Q3 (Oct): +1.5% and
+2.0% for US comps.
On the call, LOW said it was pleased with performance of the business in Q4 and early results in Q1 look promising for the key spring selling season. Paint had been comping below average, but LOW exceeded expectations in Q4 and it comped above average; lawn and garden, appliances were also above average. LOW was pleased with comp progression; US saw comp growth in 8 of 11 categories.
LOW did have some challenges, including some IT problems for its online platform on Black Friday. Also, LOW expects weakness in the Canadian housing market in the near term, but the company is positive on long term potential in Canada. From an industry perspective, LOW is positive on the 2019 outlook as the industry should benefit from income growth, lower tax rates, house price appreciation, consumers are staying in homes longer and are doing home improvement projects.
LOW hired a new CEO in 2018 with the hope of turning around the company so that it would be more competitive with Home Depot (HD). While still seeing inconstancies in store execution, LOW says it's delivering better customer service; merchandise is improving; showing improvement in key categories, including paint; seeing strength in Craftsman; and seeing positive results in PRO business. While still far from perfect, this provides confidence for 2019. LOW sees a great opportunity to capture market share due to its marketing campaign, better customer service etc. exclusive partnership with NFL should help.
While in the early stages of change and while pockets of inconsistencies are there, LOW is seeing signs of improvement, especially in merchandising. Early results are showing a reduction in out-of-stock items, which has been a persistent problem for Lowe's.
In sum, this was a good quarter overall. While revenue and EPS results were good, probably the standout metric was the sequential improvement in comps in JanQ. LOW is still in turnaround mode, but this was a good early result.
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