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HenryTo
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 Posted: Fri Feb 20, 2009 9:22 pm Post subject: Lowe's (LOW) |
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Morningstar on LOW's latest earnings:
| Quote: | | Lowe's (LOW) reported fourth-quarter results that were slightly below our estimates and reflect the very challenging consumer spending environment and its effect on many retailers in the period. In the fourth quarter, total sales decreased 3.8% year over year, to $9.98 billion, as the 9.9% decrease in same-store sales more than offset revenue from new stores. Operating income decreased 53% year over year, to $329 million (3.3% of sales), because of higher promotional activity and a moderate increase in selling and administrative expenses. While our long-term outlook is unchanged, we believe the business faces a number of challenges over the next several quarters. We remain concerned that Lowe's operations will be pressured by a weak housing market, rising unemployment, and tight credit conditions. We plan to re-evaluate our model assumptions after taking a closer look at the numbers and listening to management's comments on the conference call. For now, we don't anticipate a material change to our fair value estimate. |
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HenryTo
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| Posted: Mon May 21, 2012 10:53 pm Post subject: |
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Morningstar on LOW's 1Q earnings.
| Quote: | | The headline sales and earnings numbers in Lowe's LOW first-quarter earnings release were decent, but when stripping out benefits of favorable weather, sales via promotion, and a timing/calendar shift, the normalized results were less robust. In our view, the first-quarter performance was a microcosm of the Lowe's story. There are a number of moving parts to the puzzle, and while management is doing its best to improve the firm's long-term merchandising and competitive positioning, it’s not going to be a smooth ride each quarter, as Monday's results show. Although management lowered its full-year operating margin and earnings per share guidance, we are not changing our $34 fair value estimate at this time. Total revenue rose to $13.1 billion (up 8% year over year) as the combination of a calendar shift, warmer spring weather, and seasonal promotions provided upside versus our internal projection. Same-store sales increased 2.6%, but trailed off in April (down 3%) and fell, overall, well short of Home Depot's HD 6.1% U.S. comp. Importantly, the comp gap between Lowe's and Home Depot again failed to narrow in the quarter, which was discouraging. The company was quick to highlight traction among its contractor customer segment, but transactions above $500 fell 1% year over year amid a pullback in big-ticket promotions late in the quarter. Amid this strategic shift, gross margins were again under pressure in the quarter (down 70 basis points year over year), though the magnitude of the drop didn't come as a surprise. We applaud the company's continued focus on expense management; despite its long-term investments, selling, general, and administrative expense as a percentage of sales was down 100 basis points, to 24.6%. First-quarter EPS came in at $0.43, just ahead of our forecast. Management updated its 2012 outlook by trimming 10 basis points from the operating margin forecast (now expected to increase 90 basis points) and slicing $0.02 from EPS (now projected at $1.73-$1.83). These assumptions appear reasonable and not far from our current financial model. Separately, the company continued its strategy of applying excess cash flow toward share repurchases, buying back more than $1.7 billion in stock (58 million shares) in the first quarter alone. With the sell-off in early trading, the shares trade at roughly 14.5 times our fiscal 2013 (January 2013) earnings estimate--not terribly expensive--and the firm's $0.14 quarterly dividend translates into a 2.1% yield. We still like the medium-term growth prospects of this wide-moat firm, and though 2012 is likely to be (yet) another year of transition, and much hinges on the overall health of the US consumer and housing market, there's plenty of long-term upside for Lowe's shares. |
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HenryTo
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| Posted: Tue Feb 28, 2012 2:04 am Post subject: |
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Morningstar on LOW's 4Q earnings.
| Quote: | | Similar to its home-improvement peers, Lowe's LOW saw an uptick in sales as it benefited from favorable (warm) weather during its fiscal fourth quarter. We still think the firm has a lot of work to do if it wants to catch up with larger rival Home Depot HD, but a lot of the groundwork was laid during 2011, and the stock remains on our Best Ideas list. Given the outperformance in the seasonally light quarter and a more robust margin outlook for 2012, there's a good chance that the net result will be a modest increase to our fair value estimate. Total company revenue rose to $11.6 billion (up 11% year over year) as the combination of an extra week, warmer weather, and continued traction surrounding the new everyday low price strategy drove the outperformance. Same-store sales increased 3.5%, more than double management's 1.5% forecast (the firm has become increasingly conservative) but well short of Home Depot's 6.1% U.S. comp. As expected, gross margins were under pressure, down 140 basis points year over year, but management again reined in spending; operating margins were down just 20 basis points to 5.0%. Although it was a choppy year for the second-largest home-improvement player, with several highs and lows, full-year adjusted earnings per share came in at $1.64, near the midpoint of management's original guidance of $1.60-$1.72, first provided last February. Management's initial 2012 outlook was modestly better than expected, but the biggest source of potential upside is the operating margin line. We had anticipated 60 basis points of margin expansion (assuming roughly 2% of sales growth), but the firm anticipates a 100-basis-point increase on a GAAP basis, which would put operating margins back in the mid-7% range for 2012. Although this is still well behind Home Depot, it's an encouraging sign of management's confidence in its processes. We expect share buybacks to continue--more than $2.9 billion in shares were repurchased during 2011--which should add to EPS growth, even if sales growth remains uninspiring. Shares trade at roughly 16 times our fiscal 2013 earnings estimate and the firm pays a $0.14 quarterly dividend (2% yield at the current price). We still like the medium-term growth prospects of this wide-moat firm, and though 2012 is likely to be another year of transition, and much hinges on the overall health of the U.S. consumer and housing market, we see plenty of long-term upside for Lowe's shares. |
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rffrydr
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| Posted: Tue Dec 06, 2011 4:45 pm Post subject: |
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Don't think they got a problem on "floorspace productivity." Wood on pallets, on shelves in drive-through garages is about as productive as you can get. And the margins on plants will keep the women in the game.
Don't think Lowes is going to become Ikea any time soon either. But maybe that's the impulse to fit their help with supposed inventory checking iPhones. Lowes always been the wife's store. Women HATE spending on tools and materials.
Just wait for the economy on this one.
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HenryTo
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| Posted: Tue Dec 06, 2011 12:35 pm Post subject: |
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Morningstar on LOW. Personally, I don't have much desire to stroll in a HD or LOW store unless I have something specific to buy--even if I was moving. Showrooms, on the other hand, are a game-changer for me.
| Quote: | | On Tuesday, we took a comprehensive guided tour of a Lowe's LOW store in Charlotte, N.C., roughly 20 minutes from the firm's headquarters. This was an important opportunity for management to showcase not only the changes it is making on the merchandising side of the business, but also the early fruits of its online and mobility efforts. While still successful by some measures, Lowe's management team (and we) would readily admit that 2011 has been a relatively challenging year for the firm on many levels. While we don't plan on making changes to our $30 fair value estimate at this point, nor do we expect our opinion to change meaningfully following Wednesday's analyst day, we came away incrementally more comfortable with our long-term revenue, margin, and return on invested capital assumptions. We continue to view Lowe's as well positioned in the home-improvement retail market, particularly as housing recovers, yet in the meantime the company is also making strides to adapt and correct some of its recent missteps. Management's message came across loud and clear as we walked the store. Lowe's is on a mission to inspire customers through improved merchandise presentation so they spend more time in the stores, create a showroom-like experience designed to draw customers in, and more clearly communicate by simplifying its message to consumers. The company has accelerated its investments to make the home-improvement experience more customer-friendly, and while this is not yet fully rolled out nationwide (roughly 500 stores now), we see several subtle and not-so-subtle changes that we liked. Technology is becoming less of a hindrance, the customer is being consulted (and analyzed), and floor space has been tweaked to improve four-wall productivity. We expect to hear more about the firm's long-term strategic vision, thoughts on the capital structure, and additional detail surrounding merchandising and customer service initiatives. We will follow up with another note after the next set of meetings. |
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rffrydr
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| Posted: Mon Aug 15, 2011 7:20 am Post subject: |
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Lowes suffering relative to HD for past several quarters. My theory? Rich get richer....HD is contractor's store of choice. Lowes is for the ladies. Big price shocks in much of the run-o-the-mill hardware....which just may be a big discretionary. Meanwhile the remodel and additions for the wealthy, foreclosure repair...favor HD.
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HenryTo
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| Posted: Mon May 16, 2011 4:02 pm Post subject: |
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Morningstar on LOW's 1Q earnings:
| Quote: | | Lowe's LOW delivered first-quarter results that came in slightly below expectations, as the combination of unfavorable weather and difficult year-over-year comparisons led to a revenue shortfall. We plan to adjust our financial model based on the quarterly results and management's updated full-year guidance, but the changes will not be enough to affect our fair value estimate. While 2011 is shaping up to be yet another year of transition for the home-improvement retailer, we still view the company as well positioned as the U.S. economy improves over a multiyear period. Total first-quarter revenue dipped 1.6% year over year to $12.2 billion, as same-store sales fell 3.3%, reversing a trend of four straight quarters of positive comps. Notably, management indicated that sales through the first eight weeks in the quarter were at or above plan, and the quarterly shortfall was almost entirely driven by the month of April, which produced an 8.3% drop in sales. The company kept a tight rein on expenses, and operating margins, at 6.8%, came in only slightly below our projection (and down 20 basis points year over year). Share-buyback activity ($1 billion in the quarter) was largely expected, but helped the company meet the low end of its earnings per share range ($0.34). We still like Lowe's position in home improvement retail and do not view the quarterly "miss" as terribly meaningful. Weather is not a factor on which we place a lot of emphasis; we were instead more focused on management's commentary surrounding the lackluster housing market and consumer headwinds (such as fuel prices and inflation), which may have a more lasting impact on discretionary purchase decisions. We believe that management has adjusted expectations accordingly, based on near-term visibility, and we will look for additional macro-specific commentary from Home Depot HD when it reports first-quarter results Tuesday. |
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HenryTo
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| Posted: Mon Aug 16, 2010 11:47 am Post subject: |
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Morningstar on LOW's 2Q earnings:
| Quote: | | Lowe's LOW second-quarter results reflect an uncertain macro environment as well as prudent expense management. The company reported earnings of $0.58 per share, at the midpoint of management's forecast but just shy of consensus, as sales trends weakened following the midquarter expiration of several government stimulus programs. Comparable sales were up 1.6% year over year (versus management's expectation of 2%-4%) in a mixed quarter, as strength in appliances, outdoor, and installation sales were offset by softness in lawn and nursery categories. While specific holidays (Memorial, Father's, and Labor days) drove traffic, the company saw consumers generally pull back amid uninspiring housing and unemployment data. We are adjusting our 2010 sales, operating margin , and earnings expectations to reflect second-quarter results and management's updated full-year outlook, but expect no change to our fair value estimate. Total second-quarter revenue was $14.3 billion, a 3.7% year-over-year increase but below management and market expectations. Same-store sales growth of 1.6% slowed from 2.4% in the first quarter yet remained in positive territory, supporting our view that the firm is well positioned for a long and relatively choppy economic recovery. The gross margin was essentially flat year over year at 34.9%, as the comparable average ticket increased 2.1%, negating a slight drop in traffic. The operating margin came in at 9.9%, up 60 basis points year over year, reflecting management's willingness to pull expense-control levers and react to an uncertain spending environment. The company again chipped away at its $5 billion share-buyback program by repurchasing roughly 22.7 million shares during the quarter at an estimated cost of $550 million. Our long-term thesis remains intact, and our full-year earnings estimate remains comfortably within management's revised full-year range. We think the company performed fairly well in what was largely expected to be a weak quarter. For 2010, we expect total sales growth of roughly 4% as the housing market and consumer sentiment are likely to remain under pressure for the foreseeable future. Despite macro headwinds, management is maintaining its cautious stance and is set to deliver an operating margin of around 7.0%, up 40 basis points from the prior year. |
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HenryTo
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| Posted: Mon May 17, 2010 10:40 am Post subject: |
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Morningstar on LOW's 1Q earnings:
| Quote: | | Lowe's LOW delivered solid first-quarter results that support our long-term view of a multiyear recovery in home improvement retail. The company reported earnings of $0.34 per share, $0.05 above the high end of management's range ($0.27-$0.29) and handily beating our expectations of $0.31 per share, which was in line with consensus. The company benefited from the government stimulus program as well as favorable weather, which drove sales gains at the expense of gross margins; still, we are encouraged by the results, which were strong across categories and geographies. Comparable sales were up 2.4% (versus management's expecta tion of down 2% to flat year over year) as the consumer appears to be showing incremental signs of stabilization. Second-quarter earnings guidance came in at $0.57-$0.59, modestly below market expectations, and management remained relatively cautious, calling 2010 a year of transition while effectively incorporating the first-quarter outperformance (and not much more) into its revised full-year outlook. The company now expects 2010 total sales to increase 5%-7% year over year (up from 4%-6%) and projects earnings per share of $1.37-$1.47 (up from $1.30-$1.42). We are adjusting our 2010 sales, operating margin, and earnings expectations to reflect first-quarter results and management's raised full-year outlook, but expect no change to our fair value estimate. Total first-quarter revenue grew to $12.4 billion, a 4.7% year-over-year increase. Same-store sales growth of 2.4% accelerated from the previous quarter, as the company posted its first positive comparison in 15 quarters . The gross margin in the quarter dipped by 30 basis points to 35.2%, as higher sales volume was slightly offset by a lower ticket (2.3% drop year over year), owing to a change in product mix and selective promotional activity. The operating margin was 7.0%, down 10 basis points year over year, reflecting the mix shift as well as a modest uptick in payroll expenditures. The company also chipped away at its $5 billion share-buyback program by repurchasing roughly 18 million shares during the quarter at an estimated cost of $450 million. For 2010, we expect total sales growth of 6% as the housing market and consumer sentiment show further signs of stabilization, which should result in an operating margin of 7.0%, up 40 basis points from the prior year. |
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rffrydr
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| Posted: Tue Feb 23, 2010 10:59 am Post subject: |
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Summary of Lowes comments:
· Q4 comp transactions increased 50 bps, and comp ticket declined 2.1%. Q4 activity was better than expected
· LOW saw sequential improvement in bigger projects
· Regionally, 13 of 23 U.S. regions had positive comps for the quarter. There was sequential improvement in 22 of 23 regions with some of the largest quarter to quarter improvement in the northeast
· On the product side, 5 of 20 categories had positive comps for the quarters. Appliances seasonal living, paint, flooring, cabinets and countertops were positive.
· Economic outlook much better than a year ago
· The promotional environment was more rational
· Like JCP, LOW saw 2H better than the first half
· Gross margin is expected flat to down in Q1, but up for 2010. Lumber inflation and roofing deflation were noted
· It noted inventories were in great shape
· LOW noted that numerous states had increased their unemployment tax rates, some more than 100%, which we estimate will cause five of the 10 basis point de-leverage in Q1
· LOW talked about a buyback. This is a sign of confidence. During Q4, it purchased 21.9 mln shares at an average price of $22.81. There was $1.7 bln under the buyback program which was extended to $5 bln
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rffrydr
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| Posted: Mon Feb 22, 2010 8:15 pm Post subject: |
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Spring and a new home-buying season lie ahead. Macy's surprised with home goods outselling clothes.
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HenryTo
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| Posted: Mon Feb 22, 2010 7:06 pm Post subject: |
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Morningstar's notes on LOW's 4Q earnings:
| Quote: | | Lowe's LOW fourth-quarter results affirm our view that increasing demand for home-related goods coupled with tight inventory management will lead to modest operating margin expansion. Improving sales trends in bigger-ticket categories are encouraging and signal an increased willingness by consumers to spend on more discretionary goods. While the first-quarter outlook may have fallen short of consensus estimates, the company's full-year forecast is in line with our projections, and we are maintaining our fair value estimate. Total fourth-quarter sales were $10.2 billion, up 1.8% from the prior year, with incremental sales from new stores offsetting a 1.6% decline in comparable-store sales. We continue to see a deceleration in comparable-store sales declines and exp ect comps will swing into positive low-single-digit territory in the coming year, as sales trends in the back half of the year come in stronger than the first half. A 122-basis-point improvement in the gross margin offset deleveraging of selling, general, and administrative costs, resulting in a 40-basis-point increase in the operating margin to 3.7%. We expect tight inventory management and cost-containment efforts amid improving sales trends to lead to modest margin expansion in 2010. |
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HenryTo
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| Posted: Mon Nov 16, 2009 12:13 pm Post subject: |
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Morningstar's notes on Lowe's 3Q earnings:
| Quote: | | Lowe's LOW reported third-quarter results that put the company on track to meet our full-year estimates. The company's performance in the quarter was in line with our expectation that consumer spending on home improvement will remain weak in the near term. Our fair value estimate remains unchanged. Comparable-store sales declined 7.5% in the third quarter, worse than the 5.9% decline reported in the year-ago quarter but improving from a 9.5% decline in the second quarter. Total sales declined 3% to $11.4 billion, as new store contributions helped to somewhat offset the comparable-store sales decrease. Lowe's opened 12 stores and closed one during the quarter, and management expects to open about 13 new stores in the fourth quarter. Our outlook for 2009 assumes a 7% decline in comparable-store sales, a 3% decline in total sales, and 57 net new store openings, all of which continue to be in line with management's outlook. The gross margin improved very slightly to 34.2% from 34% in the year-ago period, while the operating margin continued to contract from year-ago levels, falling 160 basis points to 5.8%. The deleveraging of operating expenses across a lower revenue base and a $57 million pretax charge were the main reasons behind the decline. The charge related to a store closing, a reduced store opening pipeline, and asset-impairment charges for three existing stores. Operating cash flow of $4.4 billion was essentially flat through nine months compared with last year. Overall, the results were what we expect from Lowe's over the next few quarters as the health of consumer spending, the housing m arket, and the overall economy begin to stabilize, leading to a modest improvement in financial results. |
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HenryTo
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| Posted: Tue Aug 25, 2009 10:56 pm Post subject: |
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Lowe's set to expand in Australia:
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| Quote: | | Lowe's LOW announced Monday that it has entered into a joint venture with Australia's largest retailer, Woolworths, to open home-improvement stores in Australia. According to the agreement, Lowe's will own one third of the chain, which we expect will open its first store in 2011. In general, retailers tend to struggle with international expansion, given complications related to local tastes and distribution arrangements. However, we're optimistic about this agreement because Lowe's is partnering with an established and well-regarded local retailer. We're maintaining our fair value estimate. With fiscal 2009 revenue of about $37 billion, Woolworths is the largest private-sector employer in Australia and the 23rd-largest retailer in the world. It operates more than 3,000 stores across Australia and New Zealand under the brands Woolworths supermarkets, Big W discount department stores, and xxx Smith consumer electronics stores, among others. According to Lowe's, the Australian home-improvement market is worth roughly $20 billion, and the joint venture plans to open about 150 stores over the next five years. |
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HenryTo
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| Posted: Wed Aug 19, 2009 8:20 am Post subject: |
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Morningstar's video on the prospects of home improvement retailers (i.e. HD and LOW), accompanied by a full transcript (just FYI, my outlook for US home prices is more bearish than Morningstar's projections):
http://www.morningstar.com/cover/videocenter.aspx?id=304666 |
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teenwolf41
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| Posted: Mon Aug 17, 2009 8:12 pm Post subject: |
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| Just reiterates that I like HD a lot better |
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