Lowe’s (NYSE:LOW) continues to make progress toward closing the performance gap with its direct competitor, Home Depot. The company has undertaken a series of initiatives to improve customer service and product merchandising while reducing structural costs and investing in IT systems and product distribution facilities. We expect these recent actions to improve comparable sales and profitability beginning later this year and to a greater extent in future years.
Lowe’s share price has increased 16% year-to-date, yet currently trades at only 17 times analyst estimates of 2019 earnings, which do not reflect the significant potential for future profit improvement. We believe the shares have the potential to appreciate significantly as the positive financial impact of the company’s business transformation becomes more evident over the course of the year, and management continues to execute on closing the performance gap with Home Depot.
From Bill Ackman (Trades, Portfolio)'s first-quarter 2019 Pershing Square shareholder letter.
