Marvin Ellison, Lowe’s CEO, said Wednesday that the macroeconomic conditions remain favorable for the home-improvement retailer. This is what led to his Street-beatingFinancial results for quarter ended December 31, 2018.
Lowe’s head said, “We feel good regarding the macro environment specific for home improvement.” (NYSE:LOW)CNBC interviewed him, citing the large savings stock consumers had built up over the pandemic.
Ellison also cited the strong results of the housing market, noting that home prices have continued to rise, which gives homeowners the confidence to invest in their homes. Ellison also pointed out an undersupply of housing market inventory and an aging housing stock. He said this would drive demand for maintenance or repairs.
After the release of Q4 results that were better than expected, Lowe’s (LOW), gained about 3% in Wednesday’s intraday trades. Both its top and bottom line results beat expectations. The firm also gave a solid outlook for 2022.
The reaction to LOW’s earnings report was starkly different from that of rival Home Depot (NYSE:HD)The stock fell nearly 9% on Tuesday following the quarterly update. HD’s most recent results exceeded expectations, but the company said that 2022 comparable sales growth would only be “slightly optimistic.” The firm also warned of ongoing volatility in lumber prices.
LOW also felt the pressure from HD’s poorly received news report, which caused a drop of around 4% in sympathy. This was the fourth consecutive day of declines in the stock. It also meant that Wednesday’s post earnings rally only recovered some of its losses.
Ellison, in a CNBC interview, rebutted the notion that there would be a decline in home-improvement demand after the pandemic. He argued that the continuing work-from home trend and the focus on homes created by the COVID locksdowns will result in a culture of home improvements.
Lowe’s CEO commented on the supply-chain situation and claimed that the firm’s sheer size allowed it avoid some of the bottlenecks experienced by other retailers.
He said, “It’s still a challenging environment. But I do believe because it’s such a large importer and we have such a scale that we can perform much better than other retail stores.”
Anthony Cataldo, a SA contributor discusses the long-term prospects both for HD and LOW. He suggests that these “cash flow machine” are a great buy-and hold opportunity.
