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Lowe's (LOW) Digital Division and Pro Business Augur Well

Lowe's Companies, Inc. LOW appears good on the back of constant investments in the technology and merchandise category as well as strength in its digital and Pro businesses. LOW’s Total Home strategy, including complete solutions for various home improvement needs, also bodes well.

This renowned home-improvement retailer has gained 8.9% in the past three months against the industry’s 10% decline. The long-term expected earnings growth rate of 13.1% coupled with a VGM Score of A further speaks volumes for this currently Zacks Rank #3 (Hold) stock’s potential.

The Zacks Consensus Estimate for Lowe’s fiscal 2022 sales and earnings per share (EPS) is currently pegged at $97 billion and $13.51, respectively. These estimates suggest growth of 0.7% and 12.2%, respectively, from the year-ago fiscal quarter’s corresponding figures, raising analysts’ optimism on the stock.

Detailing Strategies

Strong digital base has been boosting Lowe’s performance for quite sometime now. Management has been making investments in the omni-channel channel, including expanding online assortment, boosting user experience and improving fulfillment capabilities. Sales at Lowes.com increased 7% year over year in the second quarter of fiscal 2022,  representing about 10% sales penetration.

Overall, management is focused on enhancing the omni-channel retailing capabilities in store operations, website and supply chain to resonate well with customers’ demand to shop, however, whenever and wherever they like.

In addition, Lowe’s is constantly making smart moves to offer customers a seamless shopping experience and is expanding its market delivery strategy. Recently, LOW announced its partnership with Instacart to make same-day delivery available across its more than 1,700 stores nationwide. Customers can order around 30,000 items for delivery and avail the same as fast as in an hour.

This partnership makes Lowe's one of the first retailers on the Instacart App to offer same-day and scheduled delivery for huge items of about 3x3x5 feet and 60 pounds. Consumers can also order small Halloween inflatables, fire pit essentials and small portable grills. In fact, they can purchase holiday gifts like smart home products, hand tools and electronics, and accessories, including pillows, blankets and outdoor string lights from LOW’s local stores. This move is likely to tap higher sales and boost profitability in the festive season.

Pro customers continue to be a significant driver for Lowe's business. To keep augmenting sales from pro customers, management is enhancing Pro-focused brands with Pro offerings across LOW’s stores and online through improved service levels, deeper inventory quantities, intuitive store layout and more Pro national brands.

The Pro segment is expected to continue its momentum with better in-stock inventory levels, an enriched service suite and a new Pro loyalty program. During the fiscal second quarter, pro sales jumped 13% from the year-ago fiscal quarter’s level and 37% on a two-year basis. The Pro business contributed around 25% to sales in the reported fiscal quarter.

In a nutshell, Lowe’s is well-poised for growth, given the above-discussed tailwinds.

Solid Picks in Retail

Some better-ranked stocks are Designer Brands DBI, Buckle BKE and Capri Holdings CPRI.

Designer Brands, the leading footwear and accessories designer, presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Designer Brands’ fiscal 2022 sales and earnings per share (EPS) suggests growth of 6.9% and 23.5%, respectively, from the corresponding year-ago levels. DBI has a trailing four-quarter earnings surprise of 55.1%, on average.

Buckle, a leading retailer of apparel, footwear and accessories has a Zacks Rank #2 (Buy) at present. BKE has a trailing four-quarter earnings surprise of 8.3%, on average.

The Zacks Consensus Estimate for Buckle’s fiscal 2022 sales and EPS suggests growth of 6.8% and 4.5%, respectively, from the year-ago corresponding figures.

Capri Holdings, a global fashion luxury group of iconic brands like Versace, Jimmy Choo and Michael Kors, carries a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year sales and EPS suggests growth of 3.3% and 10.1%, respectively, from the corresponding year-ago reported figures. CPRI has a trailing four-quarter earnings surprise of 32.4%, on average.


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Lowe's Companies, Inc. (LOW) : Free Stock Analysis Report
 
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