November 18, 2015 / 11:11 AM / 3 years ago

Lowe's sales top estimates amid strengthening U.S. housing market

(Reuters) - Lowe’s Cos Inc (LOW.N) followed larger rival Home Depot Inc (HD.N) in reporting better-than-expected quarterly profit and same-store sales, and the company said it expects higher spending on home improvement to continue until 2017 at least.

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

Strong results from the top two U.S. home improvement chains are in contrast to those from department store operators Macy’s Inc (M.N) and Nordstrom Inc (JWN.N), which cast a pall over the retail industry ahead of the holiday shopping season.

The S&P 500 retail index .SPXRT has fallen 4 percent since Macy’s reported results on Nov. 11. Shares of Home Depot and Lowe’s have also been volatile in the past week because of the negative sentiment surrounding retailers.

Consumers have spent more on houses, home improvement products, appliances and eating out than on apparel and accessories in the August-October quarter.

Key drivers of home improvement spending in the quarter were increased disposable personal income and higher demand for houses, Chief Executive Robert Niblock said on a conference call.

The U.S. housing recovery has been gaining traction, with soaring demand for rental apartments boosting housing starts in September.

However, U.S. housing starts in October fell to a seven-month low as single-family home construction in the South tumbled, the Commerce Department said on Wednesday.

Shares of Lowe’s and Home Depot were down about 1 pct on Wednesday.

“There are a number of factors that can always impact the market. It could be the numbers... housing starts ...could have an impact,” Niblock told Reuters.

Lowe’s maintained its profit and same-store sales growth forecasts for the year ending January, while Home Depot said it expects full-year profit and same-store sales to be at the top end of its forecast.

Niblock said the higher spending on home improvement was built into Lowe’s forecasts.

Lowe’s seasonal living business, which sells items such as air conditioners, garden decor and patio furniture, did well as customers spent more time outside due to the warmer-than-usual weather in the quarter, the company said.

Sales of appliances and tools and hardware were also above average in the quarter, the company said.

Increase in both the number of transactions and their average value helped same-store sales rise 4.6 percent.

Comparable sales in its U.S. home improvement business increased 5 percent.

Lowe’s net income rose 26 percent to $736 million, or 80 cents per share.

Net sales rose 5 percent to $14.36 billion, slightly above analysts’ average estimate.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Savio D'Souza

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