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Lowe's (LOW) Buoyant on Digital Business & Pro Strength

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Lowe's Companies, Inc. (LOW - Free Report) is climbing up the charts, thanks to its impressive growth ploys that are helping it retain momentum. LOW is quite well poised to cash in on the prevailing trends in the home improvement market, given constant investments in the technology and merchandise category as well as sturdy Pro and digital businesses. LOW’s Total Home strategy, which includes complete solutions for various types of home improvement needs, appears encouraging as well.

This renowned home-improvement retailer’s shares have increased 32.3% in a year’s time, outperforming the industry’s 17.8% rally.

Detailing Strategies

Strong digital base has been aiding Lowe’s performance for a while. Management is steadily making investments in omni-channel capabilities, including expanding online assortment, boosting the user experience and improving fulfillment. LOW continues expanding its Lowes.com assortment to meet customers' design and lifestyle. LOW is focused on enhancing the omni-channel retailing capabilities in store operations, website and supply chain, with an aim to resonate well with customers’ demand to shop however, whenever and wherever they like.

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Pro customers have been a key driver in Lowe's business so far. LOW is constantly augmenting the pro-focused brands and already refurbished its pro-service business website to efficiently serve the needs of such customers. During fourth-quarter fiscal 2021, pro sales jumped 23% year over year and 54% on a two-year basis. Management is quite focused on enhancing the Pro offering across LOW’s stores and online with improved service levels, deeper inventory quantities, intuitive store layout and more Pro national brands. The Pro segment is expected to continue its momentum with improved in-stock inventory levels, enhanced service offerings and a new Pro loyalty program.

What’s More?

Buoyed by stellar growth initiatives, Lowe’s reported robust fourth-quarter fiscal 2021 results with both sales and earnings outpacing the Zacks Consensus Estimate and improving year over year. LOW delivered the 11th straight earnings beat and the eighth consecutive sales surprise.

During the fiscal fourth quarter, the U.S. comparable sales were up 5.1% year over year and 35.2% on a two-year stacked basis. This reflects the continued success of LOWs Total Home strategy. During the same fiscal period, Lowe’s’ recorded positive comps across all three merchandising divisions with increases across Pro and DIY customers. LOW saw broad-based growth in 12 of the 15 merchandising departments comping positive. Focus on driving productivity and efficient pricing led to operating margin growth of 170 basis points in fiscal 2021.

Management highlighted that the solid sales trends continued into February and it raised guidance for fiscal 2022. LOW now expects revenues of $97-99 billion (including the 53rd week), up from the prior prediction of $94-97 billion. The 53rd week is likely to boost sales $1-$1.5 billion.

In fiscal 2021, Lowe’s revenues amounted to $96.3 billion. LOW now expects the gross margin rate to improve slightly from the year-ago reported figure. The same is compared with the earlier anticipation of a flat gross margin. The operating margin is expected to be 12.8-13%, up from the prior view of 12.5-12.8%. A VGM Score of B with an expected long-term earnings growth rate of 12.2% further speaks volumes for this presently Zacks Rank #2 (Buy) stock.

More Solid Picks You May Look at

Some other top-ranked stocks are Capri Holdings (CPRI - Free Report) , Tapestry (TPR - Free Report) and Boot Barn Holdings (BOOT - Free Report) .

Capri Holdings, which offers accessories and footwear, sports a Zacks Rank #1 (Strong Buy) at present. CPRI has an expected earnings per share (EPS) growth rate of 53.9% for three-five years. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year EPS suggests growth of 215.8% from the year-ago corresponding figure. CPRI has a trailing four-quarter earnings surprise of 1,018.2%, on average.

Tapestry, a renowned designer of fine accessories, presently carries a Zacks Rank #2. TPR has a trailing four-quarter earnings surprise of 28.2%, on average.

The Zacks Consensus Estimate for Tapestry’s current-year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the corresponding year-ago period’s levels. TPR has an expected EPS growth rate of 12.5% for three-five years.

Boot Barn Holdings, a lifestyle retailer of western and work-related footwear, apparel and accessories, presently has a Zacks Rank of 2. BOOT has an expected EPS growth rate of 20% for three-five years.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial-year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago period’s corresponding figures. BOOT has a trailing four-quarter earnings surprise of 47.1%, on average.

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