Here’s How Lowe’s is Profiting from a Strong U.S. Housing Market

November 18, 2015, 3:22 PM UTC
Lowe's home improvement superstore
MOUNT LAURAL, NEW JERSEY, UNITED STATES - 2015/06/10: Lowe's home improvement superstore. (Photo by John Greim/LightRocket via Getty Images)
Photograph by John Greim — LightRocket via Getty Images

Lowe’s (LOW), the No.2 U.S. home improvement chain, reported better-than-expected quarterly profit and sales at stores open at least a year, as people spent more on home improvement amid a strong recovery in the U.S. housing market.

The U.S. housing recovery has been gaining traction, with homebuilder sentiment hitting decade highs in July, August and September, according to the National Association of Home Builders.

Consumers spent more on houses, home improvement products, appliances and eating out than on discretionary items such as apparel in the August-October quarter, according to analysts.

Lowe’s reported an increase in both the number of transactions and their average value in the third quarter ended Oct. 30.

That helped same-store sales rise 4.6%, more than the 4.1% growth analysts on average had expected, according to research firm Consensus Metrix.

Comparable sales at its U.S. home improvement business increased 5%.

Home Depot (HD), Lowe’s larger rival, on Tuesday reported a better-than-expected 5.1% rise in third-quarter same-store sales and said rising home prices was a key growth driver.

Lowe’s shares were up 1.2% at $73.75 in premarket trading on Wednesday. The stock had risen 1.7 percent on Tuesday after Home Depot’s strong results.

Lowe’s net income rose to $736 million, or 80 cents per share, in the quarter from $585 million, or 59 cents per share, a year earlier.

Net sales rose 5% to $14.36 billion.

Analysts on an average were expecting earnings of 78 cents per share on revenue of $14.34 billion, according to Thomson Reuters I/B/E/S.

However, while Home Depot had said it expects full-year profit and same-store sales to be at the top end of its forecast, Lowe’s maintained its profit and same-store sales growth forecasts for the year ending January.

It expects profit of $3.29 per share and same-store sales growth of 4.0-4.5% for the year.

Read More

Great ResignationInflationSupply ChainsLeadership