Lowe's (LOW) Cheers on Solid Home Improvement Products Demand

While the coronavirus pandemic was seen as a disruptor for several industries, few gained from the trends and alternated lifestyle practices brought about by the same. Home improvements markets are among them. Increased stay-at-home norms led to enhanced home renovation and maintenance projects. Making homes well equipped for work-from-home, remote schooling as well as entertainment needs have gained predominance. Well-known home improvements products retailer — Lowe’s Companies, Inc. LOW — benefited from such market scenario. Higher demand across most merchandising categories and strong online services is supporting the company’s top line. Let’s take a closer look.

Solid Trends in Home Improvements Market

During third-quarter fiscal 2020, Lowe’s comparable sales in the U.S. home improvement business rallied 30.4%. Home improvements business was fueled by broad-based growth across all merchandising departments, DIY (do-it-yourself) and pro customers. In fact, all 15 merchandising departments delivered positive comparable sales (comps), exceeding 15%. Growth in lumber was the strongest, backed by demand from pro and DIY customers. Notably, the company witnessed growth in areas such as home decor, lawn and garden as well as seasonal and outdoor living.

The company is undertaking prudent measures to widen assortments and thereby meet the increased demand conditions. Its Total Home strategy targets to provide everything homeowners require for renovation and remodeling work in every area of the house. The offerings are likely to benefit pro and DIY customers. The strategy includes boosting offerings across all categories of home decor, including simple and complex installations as well as paint. Additionally, prudent partnerships and multi-year tool-rental program are helping the company provide pro customers with a broad range of assortments that suit their specific home improvement and maintenance needs.

Sturdy E-commerce Platform

Lowe’s is witnessing solid growth in its online platform, thanks to consumers’ growing inclination toward digital shopping as well as the company’s efficient omni-channel offerings. Notably, sales in lowes.com surged 106% in fiscal third quarter, wherein online penetration was 7% of total sales. Increased demand from DIY and pro customer toward contactless shopping options is driving the company’s online sales.

In order to further boost delivery capabilities, the company is on track with installing Buy Online Pickup in Store self-service lockers across all U.S. stores. The company also focuses on enhancing customers’ online shopping experience by improving services such as delivery scheduling, search and navigation features as well as order tracking. Going ahead, management believes that its online business model has tremendous potential to grow, backed by an efficient technology team and superior cloud-based platform.

Wrapping Up

Industry experts believe that home improvement companies are likely to keep gaining in 2021, as work-from-home trends persist along with other supporting factors like rapid urbanization. Such upsides along with sturdy e-commerce channel are likely to help maintain Lowe’s footing in the home improvements arena.

Markedly, this Zacks Rank #2 (Buy) company’s shares have gained 16% in the past six months compared with the industry’s 7.3% rise.

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Beacon Roofing Supply, Inc. BECN, with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 13.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fastenal Company FAST has a long-term earnings growth rate of 9% and a Zacks Rank #2 (Buy), at present.

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