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Lowe's (LOW) Omnichannel and Pro Customer to Lift Sales

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Lowe’s Companies, Inc. (LOW - Free Report) appears to be in good shape, courtesy of pro customer strategy, omni-channel efforts and merchandising initiatives. Its efforts to enhance online business led to robust comps growth in lowes.com. Constant endeavors to enhance customers’ experience and solid performance of the merchandise category also bode well.

Remarkably, shares of the Zacks Rank #3 (Hold) stock have rallied 11.2% in the past three months, outperforming the industry’s growth of 1.5%. Further, investors can’t ignore the stock’s VGM Score of A and long-term earnings growth rate of 14%, which reflects its sound fundamentals.

We note that the Zacks Consensus Estimate for top and bottom lines for the current financial year indicates improvements of 1.4% and 10.9%, respectively, from the year-ago reported figures. The consensus mark for top and bottom lines for the next financial year suggests year-over-year growth of 3.1% and 17.4%, respectively.

 

 

That said, let’s delve deeper into the factors driving the stock.

Factors Narrating Lowe’s Growth Story

Lowe’s has been gaining from strong digital presence for quite some time now. In the third quarter of fiscal 2019, the company achieved 3% comps growth on lowes.com, driven by solid efforts to enhance online business. Going ahead, management aims to continue augmenting omni-channel capabilities and enhancing consumers’ digital shopping experience. In doing so, the company plans to shift its online business to the Google cloud platform by the first half of fiscal 2020.

Also, it is making efforts such as adding SKUs and drop-ship vendors to rapidly expand product assortment online. Further, it intends to enhance customers’ shopping experience by introducing features — including one-click checkout and scheduling delivery. Such well-chalked efforts are likely to drive the company’s comps. In fact, management anticipates total sales growth of 2%, with comparable sales expected to rise 3% in fiscal 2019.

The company also remains optimistic about the home improvement business, driven by rising income and real residential investment. Notably, comparable sales for the U.S. home improvement business grew 3% in the third quarter. To top it, comps in the unit were positive in 15 geographic regions across the United States for the second successive quarter. Additionally, an improving job scenario, gradual recovery in the housing market and merchandising initiatives bode well.

These apart, pro customers have been a significant growth driver for Lowe's. Moreover, in a bid to continue augmenting sales from pro customers, the company has been boosting pro-focused brands. Additionally, Lowe’s refurbished the pro-service business website, LowesForPros.com, to give special attention to the needs of pro customers.

We believe that such well chalked out plans will help the company sustain its momentum in the long run. In fact, over the past 60 days, the Zacks Consensus Estimate for its earnings has been revised 0.5% upward for both fiscal 2019 and 2020.

3 Stocks to Consider

Target Corp. (TGT - Free Report) presently has a long-term earnings growth rate of 7.6% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Builders FirstSource, Inc (BLDR - Free Report) delivered positive earnings surprise of 28.2% in the last reported quarter. It currently carries a Zacks Rank #2.

Best Buy Co., Inc (BBY - Free Report) has a long-term earnings growth rate of 8.7% and a Zacks Rank #2 at present.

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