stock was making gains Wednesday morning, following the home-improvement retailer’s second-quarter earnings. The company not only blew past high expectations, it showed that it is continuing to catch up with industry gold standard
Lowe’s (ticker: LOW) said it earned $2.83 billion, or $3.74 a share, up from $2.14 a share a year earlier, on revenue that jumped 30% to $27.3 billion. On an adjusted basis, Lowe’s earned $3.75 a share. Analysts were looking for EPS of $2.92 on revenue of $24.32 billion.
Same-stores sales were up 34.2% in the quarter. U.S. comparable sales jumped 35.1% and online sales soared 135%.
There was a lot to applaud in the results. Gross margins expanded ahead of analysts’ expectations to 34.1%. And the company noted that every U.S. region notched same-store sales of more than 30%, with that strength apparently continuing into August.
The results build on larger peer Home Depot’s (HD) upbeat second quarter, reported Tuesday.
“The second quarter is one for the record books,” Wells Fargo analyst Zachary Fadem wrote, noting that the company’s comps outperformed Home Depot’s for the second consecutive quarter, the first time it has done so in more than a decade.
The two companies’ quarters show that demand for home improvement remains robust, boosted by the pandemic. As the outbreak rages on in the U.S., and many schools and employers have chosen remote options, more people are spending more time at home, and expect to do so for months to come. That has led many city dwellers to buy new, roomier suburban houses and consumers of all stripes to spend on improving their living space. Many of those lucky enough not to be financially hurt by the crisis are redirecting funds they might otherwise have spent on dining out and travel on their homes.
While all that is good news for both companies, the bigger beat by Lowe’s might explain why the stock is holding onto its gains while Home Depot stock ultimately lost ground post-earnings.
“While investor conversations will immediately turn to ‘sustainability’ and how do you ‘comp the comp’ for next year, we think that view is ignoring all of the benefits that come with such strong financial results, including the business momentum (retail is generally a momentum-based business), the incremental cash flow and the additional leverage they can generate with their supplier base,” RBC Capital Markets’ Scot Ciccarelli wrote. “Further, as we have continued to emphasize, that until with have some sort of health-care solution (cure/vaccine), we don’t really see why today’s consumer behaviors will change dramatically, resulting in a ‘stronger for longer’ scenario—especially for home improvement as consumers spend more time at home.”
Lowe’s shares were up 0.3% to $158.32, in line with the gains for the
Dow Jones Industrial Average.
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