Lowe’s Charts Its Own Course, Shares Up 10%

Shares of home-improvement retailer Lowe’s soared by a double-digit percentage on Wednesday on the heels of the company’s better-than-expected Q2 earnings report. Lowe’s investors were pleasantly surprised after rival company Home Depot’s quarterly results left that stock sinking just a day earlier.

Lowe’s reported a net profit of USD 3 billion or USD 4.25 per diluted share, which surpassed Wall Street’s estimates. Revenue came in at USD 27.6 billion, while comparable sales fell by 1.6%, though the damage was less than feared.

For the full year 2021, Lowe’s lifted its forecast to revenue of USD 92 billion and is targeting share buybacks worth USD 9 billion. Previously Lowe’s predicted full-year revenue of USD 86 billion.

Reports suggest that construction professionals and repairmen are buying up tools. The do-it-yourself trend that caught on during the height of the pandemic has lost steam, which pressured same-store sales. Lately, homeowners are hiring the pros to do what they were previously willing to do themselves.

Another trend that is emerging is consumers are jumping on the low interest rates in the economy and springing for larger homes. This has fueled spending on home appliances and decor, all of which benefits retailers like Lowe’s.

Glass Half Full

Investors were able to focus on Lowe’s improved sales outlook instead of the disappointing same-store sales results. The stock is up 10% and is trading back above the USD 200 level, which it has not seen since July 23. In fact, Lowe’s hasn’t seen its stock rise this much in over a year.

Home Depot Letdown

Lowe’s results came as a surprise to some investors, based on the social media response, considering that Home Depot’s quarter was a letdown. Similar to Lowe’s, Home Depot also reported weaker than expected U.S. same-store sales, which hasn’t happened since 2019. Fewer people ventured out to Home Depot in the quarter, despite higher ticket sales. Unlike Lowe’s, however, Home Depot was not able to turn the sentiment around on earnings day.

Investors punished Home Depot’s stock on Tuesday, sending shares lower by more than 4% and pressuring the Dow Jones Industrial Average. By Wednesday, Home Depot’s stock was in recovery mode, perhaps riding on the coattails of Lowe’s, and recouped 1.5% of its declines.

With the threat of the delta variant and a less dovish Fed, however, it remains to be seen how consumers will behave for the rest of the year.