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The coronavirus induced stay-at-home practice has popularized home renovation and maintenance activities. The trend is being cheered upon by several home improvement products retailers such as Lowe's Companies, Inc. LOW. Moreover, Lowe’s is gaining from consumer’s enhanced inclination toward digital transactions.
With these aces in its stack, Lowe’s is garnering investors’ optimism. Shares of this Zacks Rank #2 (Buy) stock have surged 86.8% in the past six months compared with the industry’s rise of 50.5%. That said, let’s take a closer look at the factors aiding this well-known home improvement products retailer’s performance.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Home Improvements Market Augur Favorable trends
With majority time being spent indoors due to the pandemic scenario, there is a rising focus on making homes an enjoyable and comfortable space. Do-it-yourself (DIY) projects for remodeling, decorating and maintenance of furniture and fixtures are being widely undertaken.
Growing inclination toward home improvement projects benefitted Lowe’s during second-quarter fiscal 2020. Notably, comparable sales (comps) for the company’s U.S. home-improvement business increased 35.1% in the second quarter, following an increase of 12.3% in the first quarter.
In the last reported quarter, comps gained from sturdy project demand from DIY and pro customers across channels, product categories and geographies. It saw comparable-sales growth of more than 20% across all its merchandising divisions, while all the U.S. geographic regions posted comparable-sales increase of at least 30%.
Industry experts opine that consumer spending on home improvement products is likely to remain favorable in the near term. This is expected to keep aiding Lowe’s top line in the forthcoming periods. Markedly, the Zacks Consensus Estimate for revenues in the third quarter is currently pegged at $20.6 billion, reflecting rise of nearly 18.2% from the year-ago quarter.
Other home improvement and building products retailers such as Home Depot, Inc. HD, Lumber Liquidators Holdings, Inc. LL and Fastenal Company FAST are also expected to benefit from such favorable industry outlook.
Enhanced Digital Transactions are a Boon
When shopping preferences began witnessing a major shift due to the pandemic, Lowe's accelerated its efforts to expand digital offerings. In this context, the migration of Lowes.com to the cloud as well as the roll out curbside pickup helped the company sustain online growth.
We note that the company is building upon its in-store technology and delivery network in the past 18 months to support elevated DIY and Pro customer demand. Markedly, sales at Lowes.com increased 135% in second-quarter fiscal 2020, as the company’s pro and DIY customers increasingly shopped online. This drove online penetration to 8% of sales.
Moreover, the company is focusing on further enhancing capabilities such as online-delivery scheduling and order tracking as well as search and navigation. Lowe’s latest investment in self-service lockers is another feather in its cap. More than 60% of the company’s online orders are picked up in stores. Hence, broadening pickup options are a worthwhile strategy for the company for creating a frictionless shopping experience for time-pressed customers.
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Click to get this free report The Home Depot, Inc. (HD) : Free Stock Analysis Report Fastenal Company (FAST) : Free Stock Analysis Report Lowes Companies, Inc. (LOW) : Free Stock Analysis Report Lumber Liquidators Holdings, Inc (LL) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research