Shares of home improvement retailer Lowe’s jumped 9 percent Wednesday, after the company reported sales and earnings that topped Wall Street’s forecasts.
The chain also issued a better-than-expected outlook for fiscal 2017, citing a solid housing backdrop and internal improvements as drivers.
With shares trading over $81, here are five pieces of the company’s report that stoked investors’ optimism.
Store traffic increased and picked up
As most bricks-and-mortar retailers struggle to get shoppers in their stores, traffic in Lowe’s established shops grew by 1.1 percent during the holiday quarter.
That uptick helped drive the company’s 5.1 percent comparable sales increase and marked an acceleration from the third quarter. During that prior three-month period, transactions — often used as a proxy for traffic — grew just 0.5 percent.
Big growth in big-ticket transactions
Though sales were up across all price brackets, Lowe’s saw particular strength in receipts that rang in at above $500. Boosted by a lift in the chain’s professional business, as well as gains in kitchen and appliances, the company saw a 9 percent increase in transactions worth more than $500.
Lowe’s has been aggressively chasing the appliance category as competitors like Sears give up market share.Strength across product categories and markets
Warmer weather in the South and West juiced Lowe’s home and garden sales during the winter months. Recovery efforts from the August flooding in Louisiana and Hurricane Matthew in September also drove demand for building materials.
While these weather events padded Lowe’s top line, the company nonetheless grew comparable sales in all 14 regions, and in 12 of its 13 product categories. The only category to record a decline was outdoor power equipment.
A narrower gap with Home Depot
Despite gains in the broader home improvement market, Lowe’s failed to keep pace with Home Depot‘s growth during the last three quarters.
However, the gap narrowed in the fourth quarter, helped by better supply chain operations at Lowe’s and tougher comparisons at Home Depot.
Weather may have also played a factor, since Lowe’s stores are more concentrated in the Midwest and Southeast.
Home improvement spending seen continuing
Lowe’s management expects increases in personal income, lower unemployment and rising home values to fuel demand in the category this year.
In Lowe’s quarterly consumer survey, the retailer said nearly half of the respondents who own a home indicated they’re likely to begin a project in the next six months.
“All of those things, I think, set up home improvement to continue to gain share,” CEO Robert Niblock said.
by Krystina Gustafson
