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Strong Online Sales Boost Lowe's 2nd-Quarter Results

GuruFocus.com

- By Mayank Marwah

Lowe's Companies Inc. (NYSE:LOW) released its second-quarter results before the opening bell on Aug. 19.

The home improvement retailer reported impressive quarterly results that edged past Wall Street's earnings and revenue projections as stay-at-home orders and mounting house prices enticed customers to spend on their home repair projects.


By the numbers

Lowe's net income of $2.83 billion rose 68.7%, translating to earnings per share of $2.74. The retailer posted adjusted earnings of $3.75 per share versus the anticipated $2.95 per share. Revenue of $27.3 billion fell jumped 30% year over year and surpassed expectations of $24.27 billion.

Comparable store sales for the U.S. home improvement business were up 35.1%, which was more than the projected growth of 16.3%.

Reflecting on the company's performance, President and CEO Marvin R. Ellison said:


"We delivered very strong second quarter results, with all merchandising divisions posting comparable sales growth exceeding 20% and all U.S. geographic regions delivering comparable sales growth of at least 30%. Sales were driven by a consumer focus on the home, core repair and maintenance activities, and wallet share shift away from other discretionary spending. Through our retail fundamentals strategy, we have dramatically improved our technology and operational platforms, which enabled us to meet customer demand and grow our business."



Digital sales and other key insights

As a result of the pandemic, customers often refrained from going to the physical stores, which is why digital traffic and curbside pickup gained momentum during the quarter. Lowe's online sales increased a mammoth 135%.

In order to step up its game in the online arena, the company announced last week its intention to improve its supply chain over the next 18 months so as to provide more same-day and next-day delivery services, given that faster delivery has been company's top priority.

Shifting gears, the company is currently modernizing its stores in an attempt to make it more appealing. This will help the company widen its base of professional homebuilders and contractors.

During the second quarter, the company spent as much as $460 million on frontline hourly workers, store safety and supporting communities.

Lowe's operated 1,968 home improvement and hardware stores in the U.S. and Canada as of July 31. That represented 208 million square feet of retail selling space.

Guidance

Lowe's has not provided fiscal 2020 guidance, citing the global uncertainty caused by the pandemic.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.