Lowe’s Seen Focuses on Market Share Gains – Analysis

By Michael Dabaie


Next year should be an investment year for Lowe’s Cos. with continued share gains, according to an analyst note after the home improvement retailer presented its financial outlook.

Lowe’s forecast 2022 total sales on Wednesday of $ 94 billion to $ 97 billion, below the FactSet consensus of $ 97.6 billion, with comparable sales in 2022 ranging from a 3% decline to stagnation. The FactSet consensus was for a 1.7% increase.

Lowe’s said he expects 2022 earnings per share of $ 12.25 to $ 13. The FactSet consensus was expecting EPS of $ 12.81 and Adjusted EPS of $ 12.94.

“The sales outlook has likely disappointed investors and includes a more subdued market outlook, with industry demand expected to decline to mid-range, suggesting further market share gains for Lowe’s,” Raymond James said in a note to ‘analyst. “However, the overall macroeconomic factors remain favorable for the home improvement industry, with historic levels of home price appreciation, favorable housing turnover, higher than historical household formation and support for housing. long term of the age of the building stock. “

Raymond James said Lowe’s currently has a market share of around 11% in a total addressable market of $ 900 billion, and the retailer has reiterated several initiatives for further consolidation.

“The overall message from today’s event was that LOW sees an opportunity to generate continued market share gains from Pro and DIY and has levers to pull to increase operating margin even in a growing environment. negative competition with a strong capital allocation philosophy, ”JP Morgan said in an analyst note.

Managing Director Marvin R. Ellison described the company’s strategy for increasing market share on the retailer’s conference call.

“Our Lowe’s Total Home strategy has allowed us to accelerate our market share gains as we focus on five key areas of business growth: intensify our focus on Pro, accelerate and modernize our online business, expand installation services, promote localization and elevate our product assortment, ”Mr. Ellison said on the call.

Lowe’s predicts that its sales performance will continue to outperform the market by around 300 to 400 basis points as it expects to continue to gain market share.

Chief Financial Officer David M. Denton said on the conference call: “We reaffirm the financial outlook for 2021 that we provided on our third quarter conference call, and I am pleased to report that our quarterly performance is slightly ahead. of our advice. “

Morgan Stanley said in a note that Lowe’s comparable sales forecast may turn out to be conservative, as home improvement demand has consistently surprised on the upside in 2021 and U.S. housing fundamentals remain strong. “Few of the companies in our coverage will be able to increase their margins next year. This LOW guide to margin expansion in 22 highlights its confidence in the structural elements (dynamic pricing tools, localized assortment, productivity measures) of its transformation, “Morgan Stanley said.

Morgan Stanley also pointed out that Lowe’s was one of the first companies in its coverage to provide outlook for ’22. “Compared to other names in our industry whose sales / EBIT / EPS are likely to decline in 22, LOW’s guide is likely to be one of the strongest,” Morgan Stanley said.

Wedbush said that with a less optimistic industry outlook for 2022, it remains neutral on home improvement retail and continues to favor Home Depot over Lowe’s given its higher exposure to the professional segment.

“Having only grown in line with this market in 2021, LOW’s path to these share gains that are mostly done through pro-focused initiatives is not certain,” Wedbush said in a note. ‘analyst.

Wells Fargo said that despite the subpar indications to its model, it views Lowe’s update “with a bullish lens,” noting that the FY2022 bar looks achievable and beatable and that expanding margins should continue, with or without revenue growth.

“In FY22 we understand the cautious approach,” as the company posts stimulus and inflation gains as industry may experience some decline after two-year boom, Wells Fargo said . Analysts say they see plenty of external and internal drivers for line-ups and believe Lowe’s is laying the groundwork to beat and increase potential through 2022.

Shares were down 1.5% to $ 253.70 in Thursday afternoon trading. The title closed up 5% on Wednesday.


Write to Michael Dabaie at michael.dabaie@wsj.com


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