Lowe’s shares rose more than 7% in premarket trading Wednesday after the company reported better-than-expected earnings.
Here’s what Lowe’s reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $1.77, adjusted vs. $1.32 expected
- Revenue: $19.68 billion vs. $18.32 billion expected
- Same-store sales: up 11.2% vs. 3.3% expected
However, it’s difficult to compare reported earnings with analyst estimates for the first quarter because the coronavirus pandemic has changed customers’ shopping patterns and added additional labor and safety costs for companies.
For the first quarter ended May 1, Lowe’s reported that net income rose 6.8% to $1.34 billion, or $1.76 per share, compared to earnings of $1.05 billion, or $1.31 per share, a year ago. Excluding items, the company earned $1.77 per share, outpacing analyst expectations of $1.32 per share.
Revenue rose to $19.68 billion, up from $17.74 billion a year ago.
The company also announced it is withdrawing its full-year 2020 guidance due to uncertainty related to the coronavirus pandemic.
The coronavirus pandemic hit as the home improvement retailer has been attempting to revive its business under CEO Marvin Ellison, who assumed the role in 2018. Lowe’s has been trying to build out its e-commerce platform and attract more professional homebuilders and contractors as opposed to do-it-yourself customers.
“I am also pleased with our ability to pivot to serve increased online demand with Lowes.com sales increasing 80% in the quarter,” Ellison said in a statement. He added that sales have so far remained strong through May.
Lowe’s said it remains in a solid financial position with $6 billion in cash and cash equivalents as well as $3 billion in undrawn credit under revolving facilities as of April 15. The company added that it repurchased 9.6 million shares for $947 million this quarter and paid $420 million in dividends.
Lowe’s was able to keep its stores open because they were deemed essential as the coronavirus pandemic shuttered retailers across the country for much of spring, the home improvement industry’s busiest time of year.
The company’s stock bottomed in the first quarter at a closing price of $65.02 on March 18 just as state-by-state restrictions were rolling out across the country. However, the stock has bounced back, trading above $120 per share before the open on Wednesday, bringing its market cap to more than $88 billion.
Lowe’s reported earnings a day after rival Home Depot reported a mixed first quarter. Home Depot’s sales beat expectations as Americans stayed home due to Covid-19 restrictions and invested in home improvement. However, the company’s increased revenue was offset by ballooning costs from boosting workers’ pay and benefits.
Home Depot leads in the space, boasting a bigger customer base of professional contractors and a growing e-commerce business. Like Lowe’s, Home Depot has been making improvements to its stores and website. Home Depot is investing $11 billion over three years, a decision that’s put pressure on its margins.