Here’s to housing: Lowe’s shines in Q4
Retailers of all types have reason to be optimistic about 2018 after Lowe’s reported surprisingly strong fourth quarter results and shared a favorable outlook.
Lowe’s, like its rival Home Depot, serves as a bellwether for the U.S. economy which is why the company’s fourth quarter results and favorable outlook are welcome news for the larger industry. Lowe’s said its U.S. same store sales increased 3.7% with 13 of its 14 regions and nine of 11 products categories reporting positive year over year growth. The appliance category was the company’s fastest grower, turning in another quarter of double digit growth.
The broad-based strength enabled the company to report the highest sales and profits in its history. Sales in the fourth quarter were $15.5 billion, less than $15.8 billion the prior year fourth quarter, which included an extra week. Full year sales increased to $68.6 billion compared to $65 billion, with comparisons also affected by the extra week. Sales for the fourth quarter were $15.5 billion compared to $15.8 billion in the fourth quarter of 2016. For the fiscal year, sales were $68.6 billion compared to $65.0 billion in fiscal 2016.
“In the fourth quarter, we delivered comparable sales growth of 4.1%, exceeding our expectations, through compelling consumer messaging, strong holiday event performance, and integrated omnichannel customer experiences,” said Robert Niblock, Lowe’s President, Chairman and CEO.
The company’s Web site, Lowes.com, saw fourth quarter comp growth of 28% and full year comp growth of 34%.
“As we enter 2018, we are working diligently to improve execution with a focus on conversion, gross margin, and inventory management. Given the rapidly evolving competitive landscape, we are also accelerating our strategic investments leveraging the benefits of tax reform. We continue to build the capabilities required to deliver simple and seamless experiences and strengthen our position as the omni-channel project authority,” Niblock said.
The sales growth translated to strong profitability, even though the company’s performance was affected by the additional week in the prior year reporting period. Profitability for the quarter was $554 million, or 67 cents a share, compared to $663 million, or 74 cents the prior fourth quarter. Excluding certain charges, but recognizing the prior year period included an extra week, adjusted earnings per share were 74 cents compared to 86 cents the prior year.
Full year profits totaled $3.4 billion, or $4.09 a share, compared to $3.1 billion, or $3.47, the prior year. On an adjusted basis, 2017 earnings totaled $4.39 compared to $3.99.
“Looking ahead, the home improvement industry is expected to see solid growth, supported by job and income gains, which should drive increases in both disposable income and consumer spending,” Niblock said. “And we expect continued housing tailwinds, including favorable trends in household formation, despite near-term pressure on housing availability.”
Lowes said it expects total sales to grow 4% and comparable sales to grow 3.5%. The company ended 2017 with 2,152 stores and only plans to add 10 new locations in 2018 so most of its growth comes from increasing the productivity of existing selling space and digital efforts.