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Lowe's (LOW) Witnesses Strength in Digital & Pro Businesses

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Lowe's Companies, Inc. (LOW - Free Report) continues to cheer investors with its robust strategic endeavors, including Pro customer strategy and merchandising initiatives. Amid the pandemic, the company has been experiencing favorable home improvement market trends, with consumers increasingly motivated to invest in homes for making it a comfortable space for indoor activities. Its Total Home strategy, which offers complete solutions for various types of home repair and improvements needs, is also worth a mention. Equally, management is focused on expanding omni-channel capabilities to drive growth.

These strengths have helped this home-improvement retailer’s shares surge 113.5% over the course of a year versus the Zacks Building Products - Retail industry’s 68.9% rally. Notably, the industry is placed in the top 37% among all the Zacks classified industries. On top of that, a VGM Score of A with an expected long-term earnings growth rate of 13% for this Zacks Rank #3 (Hold) stock further speaks volumes.

Encouragingly, analysts look pretty optimistic about Lowe's, evident from higher revisions in its earnings estimates. The Zacks Consensus Estimate for earnings has moved up 0.8% to $9.82 for fiscal 2021 and 0.4% to $10.89 for fiscal 2022 over the past seven days. Also, the consensus mark for the company’s first-quarter fiscal 2021 earnings has risen 0.8% to $2.48 in the same time frame.

Elaborating Strategies

Lowe’s digital strength includes enhancing the omni-channel retailing capabilities across store operations, website and supply chain with an aim to resonate well with customers’ demand to shop, whenever and wherever they like. It is also expanding the fulfillment capabilities to diligently support the hike in demand. The company has also rolled out curbside pickup and launched touch BOPIS lockers across stores. It also began rolling out geofencing technology, which alerts stores when consumers are on their way to pick up orders, thus allowing faster fulfillment on their arrival at the store. During fiscal 2020, the company witnessed 111% sales growth on Lowes.com.

Lowe's Total Home strategy is focused on boosting market share via accelerating investments across pro, online, installation services, localization and product assortment. This strategy is an extension of the company’s retail-fundamentals approach. Markedly, its home-improvement business has been gaining from broad-based growth across all merchandising departments, do-it-yourself (DIY) and pro customers as well as growth in store and online. Lumber category has also been performing outstandingly. Its compelling product offering of renowned brands and high-value private labels helped it efficiently cater to the elevated home-related projects demand. During fourth-quarter fiscal 2020, comparable sales for the U.S. home-improvement business grew 28.6%.

Strength in Lowe's Pro business is also acting as a key catalyst. In the latest developments, the company made a significant step regarding the New Home for Pros as it launched a tailored store shopping experience for the Pros. This enhanced capability is currently rolled out nationwide, with various new offerings like The Pro Zone, Pro Trailer Parking, Pro Checkout and Flexible Credit Options. These upgrades will help Pro customers conveniently and quickly avail the items they require. Additionally, Lowe's rolled out new technology offering insights that will aid associates engage with Pro customers and boost their relationship with them.

Over the recent years, Lowe's has been enhancing its Pro offerings and fundamentals, including job lot inventory quantities and enhanced store service. It also rolled out Lowe's For Pros Loyalty program as well as services like Lowe's Tool Rental. The company has been enhancing pro-focused brands to drive sales. Markedly, all these enhanced capabilities will help Lowe's tap the approximately $400-billion Pro product market.

With that said, Lowe’s looks well positioned to capitalize on the demand in the home improvement market backed by investments in technology, merchandise category and strength in Pro business.

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Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18% and a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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