February 25, 2015 / 11:50 AM / in 3 years

Higher home renovation spending drives sales at Lowe's

A view of the sign outside the Lowes store in Westminster, Colorado February 26, 2014. REUTERS/Rick Wilking

(Reuters) - Lowe’s Cos Inc (LOW.N), the No. 2 U.S. home improvement chain, reported same-store sales well above analysts’ estimates as lower gas prices and an improving job market encouraged Americans to spend more on home renovations.

Lowe’s shares rose 2.5 percent to $76.50 premarket as the company also forecast full-year sales above estimates.

“Macroeconomic fundamentals are aligned for modestly stronger home improvement industry growth in 2015,” Chief Executive Robert Niblock said on Wednesday.

Increased spending on home renovations also helped larger rival Home Depot (HD.N) post better-than-expected sales and profit on Tuesday.

Lowe’s forecast full-year earnings of about $3.29 a share, edging past the average analyst estimate by one cent.

The company said it expects same-store sales to grow 4-4.5 percent in the year ending January 2016.

Total sales are expected to rise between 4.5 percent and 5 percent. The forecast translates to sales of $58.75-$59.04 billion - above the average analyst estimate of $58.52 billion, according to Thomson Reuters I/B/E/S.

Lowe’s same-store sales increased 7.4 percent in the fourth quarter, higher than the 5.1 percent estimated by analysts on average, according to research firm Consensus Metrix.

Net income rose to $450 million, or 46 cents per share, in the fourth quarter ended Jan. 30, from $306 million, or 29 cents per share, a year earlier.

Net sales rose to $12.54 billion from $11.66 billion.

Analysts on average expected a profit of 43 cents per share on sales of $12.31 billion, according to Thomson Reuters I/B/E/S.

In the 52 weeks to Tuesday’s close, Lowe’s stock gained 58 percent, outperforming Home Depot’s 50 percent increase.

Reporting by Nandita Bose in Chicago and Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty

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