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Lowe's to Benefit From Sturdy Comps and Digital Initiatives

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Lowe's Companies, Inc. (LOW - Free Report) has been witnessing sturdy comps growth, backed by well-chalked initiatives to drive sales across stores and online platform. Also, the company is streamlining its store portfolio, and enhancing customer shopping experience with advanced technology and inventory rationalizing to generate incremental sales. This apart, management is on track with its strategies to intensify customer engagement through improved personalized marketing and digital promotions.

Further, the company expects to benefit from opportunities in the home improvement market. In a bid to continue realizing sales from pro customers, Lowe’s has been augmenting pro-focused brands. Recently, Lowe's introduced Mapei — a leading tile setting brand — across its stores. The company also launched Zoeller, a renowned brand in pump. Additionally, Lowe’s refurbished its pro-service business website, LowesForPros.com, in order to give special attention to the needs of its pro-customers.

All these efforts helped the stock to outpace the industry in the past six months. Shares of this Zacks Rank #3 (Hold) company have rallied approximately 26%, outperforming the industry’s and S&P 500’s growth of around 14% and 9%, respectively. Additionally, the stock’s long-term earnings growth rate of 14.4% and a Growth Score of A reflect its inherent strength.


 

Analysts believe an improving job scenario, gradual recovery in the housing market and merchandising initiatives bode well for the company. Lowe’s, which competes with Home Depot (HD - Free Report) , has been delivering robust top-line performance for quite some time now. Notably, sales in the second quarter of fiscal 2018 advanced 7.1% year over year, after posting improvement of 3% in the preceding period.

In addition, comparable sales (comps) rose 5.2% in the second quarter of fiscal 2018, following a 0.6% increase in the first quarter. Encouragingly, management expects comps to continue rising in the forthcoming periods. For fiscal 2018, it anticipates about 3% rise in the metric.

In a bid to concentrate more on home improvements, the company plans to exit Orchard Supply Hardware business. However, this divestiture along with management’s plan to rationalize inventory levels weighed on its outlook for fiscal 2018. Additionally, the company has been witnessing adverse product mix shifts and higher transportation costs.

For fiscal 2018, management now projects total sales growth of approximately 4.5%, down from the prior estimate of a rise of 5%. Earnings are now anticipated in the band of $4.50-$4.60, considerably lower than $5.40-$5.50 projected earlier.

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