Lowe’s Signals a Rebound

August 22, 2019, 5:26 PM UTC
Lowe's Reports Quarterly Earnings
Lowe's posted strong second-quarter profits, boosting optimism for the flagging home-improvement chain's future. Justin Sullivan/Getty Images
Justin Sullivan—Getty Images

Lowe’s is showing signs of a turnaround, as it blew past second quarter profit expectations, buoyed by strong demand for spring goods and sales to contractors.

“Our transformation is ongoing, and our future is bright. We are confident that we are on the right path to capitalize on solid demand in a healthy home improvement market and generate long-term profitable growth,” said CEO Marvin Ellison. he said. Pointing in that direction, Lowe’s saw growth in same-store sales across the U.S., despite wrestling with lower lumber prices and rough spring weather, Ellison said

Ellison, a one-time Home Depot executive, took the top job at Lowe’s last year after being at the helm of J.C. Penney for four years. Since, he’s been trying to reshape the culture at the home improvement retailer, which has been a distant second to Home Depot in the sector. Weaker-selling goods are also disappearing from stores.

Wall Street likes what he’s doing.

Lowe’s stock surged 10.5% or, $10.23 to $108.10 in Wednesday afternoon trading.

Ellison has thinned the executive ranks at the company and is outsourcing some duties once done by employees, such as maintenance. That has meant thousands of layoffs.

In an interview with The Associated Press on Wednesday, Ellison said Lowe’s has been trying to strip away tedious tasks from sales associates like loading trucks and stocking shelves so they are more efficient and can spend more time with customers. He said this year, each store has added 120 hours that are all devoted to spending time with customers. That translates to three new full-time employees at each store.

For the three months ended Aug. 2, the Mooresville, N.C., company earned $1.68 billion, or $2.14 per share. A year earlier it earned $1.52 billion, or $1.86 per share.

Stripping out one-time costs, earnings were $2.15 per share. That handily topped the $2 per share that analysts surveyed by Zacks Investment Research forecast.

Revenue totaled $20.99 billion, slightly higher than Wall Street’s expectations.

Sales at stores open at least a year climbed 2.3%, and rose 3.2% in U.S. stores. Industry analysts watch that figure closely because it removes volatility from recently opened or closed stores, meaning it’s a good barometer of a retailer’s health.

Ellison said he feels good about the economy and says he doesn’t see any warning signs for the second half of the year. He also noted that two-thirds of the products that Lowe’s sells is non-discretionary.

On Tuesday rival Home Depot Inc. also beat second quarter profit expectations, but the company cut its full-year sales forecast on declining lumber prices and the potential impact tariffs may have on its customers.

Lowe’s maintained its full-year adjusted earnings outlook of $5.45 to $5.65 per share.

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