• Sun. Jun 20th, 2021

Lowe’s (LOW) earnings Q1 2021 beat estimates

A customer pushes a shopping cart towards the entrance of a Lowe’s store in Concord, California, on Tuesday, Feb. 23, 2021.

David Paul Morris | Bloomberg | Getty Images

Lowe’s said Wednesday that fiscal first-quarter sales rose 24{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb}, outpacing Wall Street expectations, as consumers continued to invest in their homes and sales picked up among home professionals.

The home improvement retailer said momentum continued into May. Based on those trends, Lowe’s said it’s tracking ahead of its prior sales forecast of $86 billion this fiscal year.

Despite its strong quarter, shares closed down 1{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} to $190.72 Wednesday as investors compared the company against its exceptionally high growth during the peak of the pandemic and worried that the labor shortage could slow down the housing market.

As of Wednesday’s close, Lowe’s shares have risen about 18{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} this year, bringing its market value to $136.78 billion.

Here’s what the company reported for the fiscal first quarter ended April 30 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: $3.21 vs. $2.62 expected
  • Revenue: $24.42 billion vs. $23.86 billion expected

Net income rose to $2.33 billion, or $3.21 per share, from $1.34 billion, or $1.76 per share, a year earlier. The results outpaced the $2.62 per share expected by analysts surveyed by Refinitiv.

Net sales climbed to $24.42 billion from $19.68 billion last year, and were higher than analysts’ expectations of $23.86 billion. 

Lowe’s same-store sales grew by 25.9{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} in the quarter. That’s higher than the growth of 20.3{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} that Wall Street expected, according to a survey by StreetAccount.

Gaining more pro business

For some analysts, however, that sharp trajectory wasn’t good enough. Zack Fadem, a senior equity analyst for Wells Fargo, said in a research note that some had expected to see growth in the upper 20{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} to low 30{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} range.

At rival Home Depot, sales soared by nearly 33{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} in the first quarter, but the retailer declined to provide a forecast. Its shares fell when it reported earnings on Tuesday and closed down 0.73{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} to $314.45 on Wednesday.

Both Home Depot and Lowe’s shares have gained around 18{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} since the start of the year.

Lowe’s CEO Marvin Ellison emphasized reasons why investors should keep betting on the company on an earnings call. He said it is winning more business from home professionals, a more lucrative and steadier kind of customer. He said it will keep adding more brands to its stores and website, so it carries everything from lumber to throw pillows. And he said real estate trends remain on the retailer’s side.

“Although all of us are looking forward to a post-Covid world, our research tells us that the importance of the home will remain elevated for many years to come,” he said.

Lumber was the company’s strongest growth category in the quarter, said Bill Boltz, executive vice president of merchandising. Comparable sales also exceeded 30{911ea05452e114f1778c76ca86733b6032c246f8f651bb1f01d12abf04b54efb} for home decor, electrical, kitchens and bath and seasonal and outdoor living when compared with the year-ago period.

He said stimulus checks supported bigger ticket projects and the company saw early demand for popular spring purchases, such as patio items and grills.

Managing supply shortages