Lowe's Companies Inc. (LOW, Financial) released its first-quarter 2021 earnings results on May 19 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. However, shares dropped 1.65% in premarket trading to $189.4 following the earnings announcement.
Earnings results
The home improvement retailer posted adjusted earnings of $3.21 per share versus the anticipated $2.62 per share. Revenue of $24.42 billion surpassed expectations of $23.86 billion.
Comparable store sales were up 25.9% in the reported quarter, which was more than the projected growth of 20.3%.
Reflecting on the company's performance, President and CEO Marvin R. Ellison commented:
"Our outstanding performance continued this quarter, as we delivered strong sales growth and operating margin expansion. We delivered over 30% growth in Pro, over 18% growth in all 15 U.S. regions, and growth in Canada that outpaced the U.S. I would like to thank our front-line associates for their hard work and commitment to delivering exceptional customer service. Looking forward, I remain confident in our ability to accelerate our market share gains while driving further improvement in operating margin."
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 (HD, Financial), 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 employed 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 compensation in fiscal 2020 to help avoid the problems some other companies are facing of not being able to find employees due to not paying a living wage.
At the quarter's end, the company operated as many as 1,972 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 $6.7 billion. Long-term debt (barring current maturities) stood at $21.91 billion.
During the quarter, the company bought back 16.8 million shares for a total cost of $3.1 billion. Additionally, the company paid out $440 million in dividends during the same period.
Looking ahead
Going forward, the company says that customers are expected to take up more indoor as well as outdoor projects in the near term, which could be beneficial for the business.
Lowe's projects sales to be $86 billion in fiscal year 2021. Capital spending guidance is about $2 billion. The company plans to buy back about $9 billion worth of shares in fiscal 2021.
Disclosure: I do not hold any positions in the stocks mentioned.
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