Lowe's Companies Inc. (LOW, Financial) reported its first quarter results on Wednesday for the period ended May 1. Though some of the results were not on par with estimates, profits increased by 8% as compared to the same period last year. Comparable store sales also saw an increase of 5.2%. However, the posted EPS and quarterly sales did not perform as per analysts' expectations. Shares fell 6% before the opening bell on trading day Wednesday indicating the disappointment of investors.
Financial stats
Analysts from Thomson Reuters had predicted the North California-based company would earn $0.74 per share. However, Lowe's posted earnings of $673 million, or $0.70 a share. This was an improvement as the company earned $624 million, or $0.61 a share for the same period last year. Revenue rose to $14.13 billion for the quarter as compared to the $13.4 billion for the same quarter in the prior year. However, this was again not up to Wall Street's prediction of $14.23 billion revenue. Thomson Reuters estimated the first-quarter revenue to be $14.28 billion. Same-store sales increased by 5.3% for United States businesses while same-store sales for Lowe's, as a whole, grew by 5.2%. Gross margin saw a slight decrease from 35.5% in last year's first quarter to 35.47% in this year's quarter. Total expenses as a percent of total sales decreased to 27.7%. Year over year, the total expenses were 28.47%. Sales rose 5.4% from $13.4 billion in the first quarter last year to $14.1 billion this quarter.
Lowe's currently operates through 1843 stores across the U.S., Mexico and Canada. Selling space constitutes around 201.2 million square feet. Robert Niblock, chairman, president and CEO of Lowe's, said that he was pleased at the strong first-quarter results. "We generated comparable sales growth in all regions of the country and across all product categories, driving strong earnings per share growth. I would like to thank our employees for their dedication to serving customers," he said.
Handling competition is tough
Lowe's, however, has a long way to go while competing with its arch rival Home Depot Inc. (HD, Financial). Home Depot posted earnings and revenues that went on to beat estimates made by analysts. Sales also grew very strongly due to greater spending in the ever-improving housing industry. Walmart Stores Inc. (WMT, Financial), on the other hand, did not perform so well. Revenue witnessed a fall of 0.1% as compared to the same quarter last year. Consolidated operating income also fell by 8.3%. Macy's Inc. (M, Financial) also saw weak sales in the quarter. Given these performances, Lowe's definitely has a chance to grow and improve to be the number one hardware chain. Currently, it is the second-biggest hardware chain after Home Depot.
Investors' take
Lowe's bought back around $1 billion of its stock. The company had undertaken a share repurchase program as well as gave $222 million to investors in the quarter. The retail home improvement chain had committed to return all its excess cash to its investors. For the fiscal year 2015, Lowe's has estimated an EPS of $3.29 a share. Total sales growth is expected to be in the range from 4.5-5%. Comparable store sales are expected to grow between 4-4.5%. Wall Street, however, estimates the full-year earnings to be around $3.31 a share. Annual sales are expected to grow by 4.9% to $58.97 billion, according to Wall Street's estimates. Though Lowe's shares fell 6.86% to $66.90 in pre-market trading, it seems that shares will pick up soon. The home improvement company is expected to open15 to 20 new hardware and home improvement stores. EBIT (Earnings before Interest and Taxes), as a percent of operating margin, is estimated to rise by 80-100 basis points for the fiscal year 2015. The company also estimates the effective income tax rate to be around 38.1% for the year. Investors must be on cloud nine after Lowe's announced a new repurchase program of $5 billion common stock and declared dividend of $0.23 a share for the quarter.
