Lowe’s is finally closing in on larger rival Home Depot in same-store sales growth, one of the most closely watched yardsticks of success in retail.
Lowe’s said Wednesday that sales at its home-improvement stores open longer than 13 months rose by 5.1 percent in the quarter through October. That almost matched Home Depot’s 5.2 percent gain and is the closest that Lowe’s has come to its competitor on that measure in more than four years. Lowe’s also raised its annual profit and sales forecast, while Home Depot maintained its outlook Tuesday.
CEO Robert A. Niblock has taken advantage of years of rebounding home values by adding workers in Lowe’s stores to help customers with projects. The company’s strategy to revamp its product mix with new items and invest more in catering to professional contractors also has paid off, said David Schick, an analyst at Stifel Financial Corp. “Lowe’s has been working on a number of initiatives over time, and you are seeing some of that play out,” he said. “They’ve entered a different gear.”
Lowe’s shares closed up by $3.73, or 6.37 percent, on Wednesday, to a record $62.26. The shares had gained 18 percent this year through Tuesday, while Home Depot advanced 17 percent. That compares with an 11 percent advance for the Standard & Poor’s 500 Index.
The battle between Home Depot, the largest U.S. home-improvement chain, and No. 2 Lowe’s has favored both sides over the years. Lowe’s frequently posted better results before and during the last decade’s recession, then Home Depot went on its latest run after improving customer service.
Being able to match Home Depot’s results is “exactly what we’re striving for,” Niblock said. “We want to be known as the best home-improvement company in the business.”
Profit for the fiscal year ending Jan. 30 will be about $2.68 a share, Lowe’s said. Analysts estimated $2.63, matching Lowe’s previous projection. Same-store sales may rise by 3.5 to 4 percent, up from an earlier forecast for a 3.5 percent gain.
Net income advanced by 17 percent, to $585 million, or 59 cents a share, in the third quarter. The average of 25 analysts’ estimates compiled by Bloomberg was 58 cents a share. Revenue rose by 5.6 percent, to $13.7 billion, topping the average projection. The 5.1 percent gain in same-store sales also surpassed the average estimate for an increase of 4.1 percent.
Big-ticket items such as appliances drove sales, helping purchases of more than $500 gain 9 percent, executives said on a conference call. The company will buy back $300 million more in stock this year than originally planned, Chief Financial Officer Robert F. Hull Jr. said.