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Lowe's highest earnings estimate, with gross sales in the identical retailer up 28%, warns that some DIY tendencies might fade

Lowe's announced Wednesday that sales in the same store rose 28.1% in the fourth quarter as consumers spent more on home projects during the pandemic.

This is higher than the 22% growth forecast by analysts, according to StreetAccount. Despite the strong results, Lowe's continues to believe sales could weaken as the pandemic eases.

Lowe's shares rose more than 2% in premarket trading.

The company reported for the quarter ended Jan. 29, versus Wall Street expectations, based on an analyst survey by Refinitiv:

Earnings per share: $ 1.33 adjusted versus $ 1.21 expected Revenue: $ 20.31 billion versus $ 19.48 billion expected

Lowe reported net income of $ 978 million, or $ 1.32 per share, for the fourth quarter, compared to $ 509 million, or 66 cents per share, a year earlier.

Excluding items, the company earned $ 1.33 per share, beating the analysts polled by Refinitiv, which was forecasting $ 1.21 per share.

Net sales rose to $ 20.31 billion, beating analysts' expectations of $ 19.48 billion.

Sales in US stores open for at least a year and online sales grew 28.6% for the quarter.

CEO Marvin Ellison said the company has seen high demand across the board. Sales increased 16% in all merchandising departments and more than 19% in all regions of the country. Online sales rose 121% in the quarter.

Lowe & # 39; s reiterated the prediction he made on an investor's day in December. Chief Financial Officer David Denton had said home improvement product sales are likely to decline in 2021 as more people get Covid-19 vaccines and spend more time outside their homes.

He presented three scenarios for a robust, moderate or weak market. In a robust market, the retailer expects an adjusted base mix of 5% to 7% for home improvement demand in 2021. In a moderate and weak market, demand would likely decrease by 7% to 9% and 10% respectively.

Even in a weak market, Denton said, the retailer is ready to improve its operating margins. He said that since sales to do-it-yourself customers are moderate, they could gain a foothold with home professionals – a smaller segment of Lowe's customer base, but one that is set to grow.

Jefferies analyst Jonathan Matuszewski said he was betting on the company's robust market scenario. He said more consumers have become comfortable taking on do-it-yourself projects, a pattern they are likely to repeat. The company gives Lowe's buy recommendation with a price target of $ 207. This would translate into a 20% gain over current stock trading.

He cited industry surveys that found that more than 20% of respondents who have done DIY projects in the past year have used a drill for the first time. The survey also reflected a more balanced mix of women and men taking on the projects.

"We believe that the entry of new Americans into the world of DIY projects is the argument for Lowe's as they make challenging comparisons in F'22," he said in the research note. "In addition, we believe that investors underestimate the sense of achievement of home improvement due to the skills newly acquired during the pandemic and the associated propensity to tackle future (more complex) projects."

Rival Home Depot's fourth quarter earnings also beat Wall Street's expectations this week. The retailer reported strong demand for DIY project accessories, outdoor items like patio furniture and Christmas decorations as shoppers spend more time at home. However, there was no outlook for the year as it was uncertain how long the pandemic will last and what that means for consumer spending.

Both retailers are expected to see higher costs as long as the health crisis continues. In its earnings report, Lowe & # 39; s said it spent more than $ 100 million in the fourth quarter and more than $ 900 million in additional Covid-related employee compensation and benefits during the year. It said it spent nearly $ 1.3 billion on pandemic-related spending, including higher wages and business security measures during the fiscal year.

The company spent $ 3.4 billion on share buybacks and paid dividends of $ 452 million in the fourth quarter.

At the close of trading on Tuesday, Lowe's shares were up nearly 35% last year. The company's market value is $ 123.53 billion.

Read the full press release here.

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