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Lowe’s shares plunge as fourth-quarter earnings, 2018 outlook fall short of expectations

Home improvement retailers are benefitting as Americans renovate their homes at a record pace, but it seems Lowe’s rival Home Depot is getting the biggest boost

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Lowe’s also announced it had extended its long-running partnership with paint maker Sherwin-Williams

Shares in Lowe’s Companies Inc (NYSE:LOW) plunged on Wednesday morning after the home improvement retailer’s fourth-quarter earnings fell short of Wall Street expectations.

A squeeze on margins meant net income dropped to US$554mln, or 67 cents a share, in the three months ended February 2, compared with US$663mln, or 74 cents, in the year-ago period, although that did include an extra week.

Excluding one-time items, adjusted earnings per share came in at 74 cents, 13 cents short of Wall Street forecasts.

There was some better news on the revenue front, with sales totalling US$15.49bn. That’s still a 2% year-on-year fall, but analysts had feared it could be worse and guided for US$15.33bn.

Same-store sales – a key metric for retailers which strips out the impact of new and closed stores – also fared better than expected, rising a little more than 4%, one percentage point higher than estimated.

But rival Home Depot Inc (NYSE:HD) recorded same-store sales growth of 7.5% over the same period, and it seems the largest US home improvement chain is getting more of a lift than Lowe’s as Americans renovate their homes at a record pace.

Looking to the full fiscal 2018, Lowe's expects total revenues to grow about 4% and same-store sales to increase by roughly 3.5%. The company said it expects to build ten new stores in 2018.

“We achieved comparable sales growth that exceeded our expectations driven by compelling consumer messaging, strong holiday event performance, and our integrated omni-channel customer experiences," said president and chief executive Robert Niblock.

“As we enter 2018, we are working diligently to improve execution with a focus on conversion, gross margin, and inventory management.”

Also on Wednesday, Lowe’s said it had extended its decades-old partnership with paint maker Sherwin-Williams Co (NYSE:SHW), which will it the only national retailer to sell Sherwin’s brands, outside of its own stores.

The aim with securing these exclusive partnerships is to attract more shoppers, while paint also helps to bolster sales as shoppers tend to add other things to their basket such as brushes, rollers and tape.

Lowe’s shares were down 7.1% to US$89.23 on Wednesday morning.

Quick facts: Lowe's Companies, Inc.

Price: 117.66 USD

NYSE:LOW
Market: NYSE
Market Cap: $90.18 billion
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