Lowe's higher sales overshadowed by Home Depot hangover

Wed Feb 24, 2016 12:01pm EST
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By Yashaswini Swamynathan

(Reuters) - Home improvement chain Lowe's Cos Inc (LOW.N: Quote) reported an increase in quarterly comparable sales that paled in comparison to those of rival Home Depot Inc (HD.N: Quote), despite beating Wall Street expectations.

Shares of Lowe's fell as much as 4.5 percent on Wednesday. Home Depot was off about 1 percent amid declines in the broader market.

Home Depot and Lowe's are benefiting from pent-up demand for houses in the United States after the 2008 financial crisis, while low interest rates and growth in jobs, wages and credit have spurred spending on big-ticket projects such as home remodeling.

Although fourth-quarter sales at Lowe's U.S. stores open for more than a year rose a healthy 5.5 percent, the increase was less than the 8.9 percent reported by Home Depot a day earlier.

Lowe's also said on Wednesday that it expected 2016 sales to rise 6 percent, higher than the 4.8 percent that analysts were expecting and matching Home Depot's forecast.

"As good as (Lowe's) numbers are, comparisons will inevitably be drawn with Home Depot's much stronger results," said Hakon Helgesen, analyst at research firm Conlumino.

"This takes the shine off (Lowe's) figures as it indicates that Home Depot is adding market share at a faster pace than Lowe's."

Besides an improving housing market, unseasonably warm weather in the holiday quarter encouraged customers to continue outdoor activities and home renovations for longer than usual.   Continued...

A Lowe's home improvement store is seen in Alexandria, Virginia in this file photo dated August 17, 2009. REUTERS/Jim Young