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Mayank Marwah
Mayank Marwah
Articles (1050) 

Lowe's 4th-Quarter Results: Looking Beyond the Numbers

Cost-cutting efforts combined with better store traffic helped surpass earnings and revenue projections

February 24, 2021 | About:

Lowe's Companies Inc. (NYSE:LOW) released its fourth-quarter and full-year 2020 earnings results on Feb. 24 before the market opened.

The company's earnings and revenue beat expectations as a result of the continuous cost-cutting measures, coupled with better customer traffic at physical stores. Shares plunged 0.35% in premarket trading to $168 following the earnings announcement.

Earnings results

The home improvement retailer posted adjusted earnings of $1.33 per share versus the anticipated $1.21 per share. Revenue of $20.31 billion surpassed expectations of $19.48 billion.

Comparable store sales were up 28.1% in the reported quarter, which was more than the projected growth of 22%.

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

"Strong execution enabled us to meet broad-based demand driven by the continued consumer focus on the home, with growth over 16% in all merchandising departments, over 19% across all U.S. regions and 121% on Lowes.com. I would like to thank our front-line associates for their continued dedication to serving our customers and communities and supporting safety in our stores. I am pleased with our progress in 2020 as we generated nearly $90 billion in sales, with annual sales growth of over $17 billion, while also enhancing our operating efficiency. Looking ahead to 2021, we expect to grow market share and drive further operating margin expansion."

Efforts for improvement

The company is currently in the process of a transformation plan under Ellison, who took the helm as CEO in 2018. The transformation focuses on the expansion of the e-commerce business, since almost all of the company's revenue currently comes from the brick-and-mortar stores. As compared to its rival Home Depot (NYSE:HD), Lowe's lags behind in the home improvement e-commerce space.

In addition, Lowe's is looking to widen its base of professional homebuilders and contractors, a key focus that helps differentiate it from competitors. The company is also putting in efforts to speed up the process of appliance deliveries, which is the company's core area of operations.

Lowe's has plans to employ more people to handle the spring rush. Spring is the busiest period for the company, as home improvement projects are most popular during the season.

Over the course of the pandemic, the hardware store chain has expanded paid leave for both hourly and non-hourly workers. The company announced it spent roughly $1.3 billion towards frontline and hourly associates' bonuses and compensationin fiscal 2020.

At the quarter's end, the company operated as many as 1,974 home improvement and hardware stores in North America (U.S. and Canada), which represents 208 million square feet of retail selling space.

Financials and share repurchases

At the end of the quarter, the company's balance of cash and cash equivalents stood at $4.7 billion. In addition, the company had $3 billion in unused capacity under its revolving credit lines. Long-term debt (barring current maturities) stood at $20.67 billion.

During the quarter, the company bought back 21.1 million shares for a total cost of $3.4 billion. Additionally, the company paid out $452 million in dividends during the same period.

Financial forecast

Lowe's projects adjusted earnings to be around $9.90 per share for the year, and it expects sales to be $86 billion.

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

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About the author:

Mayank Marwah
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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