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$21.20 0.56 (2.71%)
7/23/2008 4:01 PM

Lowe's Companies, Inc. (LOW)

CAPS Rating:
***

The Company is a home improvement retailer, with specific emphasis on retail do-it-yourself customers, do-it-for-me customers who utilize its installation services, and Commercial Business Customers.

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Avatar NetscribeRetail (< 20) Submitted: 1/17/07 12:58 AM : Outperform Start Price: $32.77 LOW Score: -25.05

Lowe's Companies, Inc. operate as one of the largest home improvement retailer in USA. The Company offers a line of products and services for home decorating, repair and remodeling and property maintenance. As of December 2006, the Company operated more than 1,300 stores in 49 states.

The US Home Improvement Market, currently at a size of $291 billion is forecasted to grow at an average annual rate of 4.9% over the next 5 years. The long-term outlook for the housing market remains favorable; however, the current slowdown could be prolonged if the interest rates and unemployment levels continue to remain at the same levels. Although Lowe’s and Home Depot dominate the home improvement market, they account for approximately 18% of the market share, having a potential to gain market share as the smaller players falter in a weaker housing market. Having been challenging for a long period of time, an increase in rebuilding efforts as a result of hurricanes, this year, has created an improved sales environment for home improvement industry.

Although the housing slowdown has adversely affected the home furnishing industry, in terms of decreasing sales and earnings, Lowe’s has managed to increase its sales and earnings consistently at an average rate of 18.2% and 23.5% respectively for the past three years due to the sheer size of its concentrated US operations and excellent knowledge about market segmentation.

For the nine months ended November 2006, Lowe's revenues increased by 16%, reflecting an increase in comparable store sales and the addition of 97 new stores, by incurring a capital expenditure of nearly $100 million out of existing cash reserves, providing new business functionality. The management team continues to be optimistic about the future of home improvement business and expects a continued growth in sales during 2007. Lowe’s remains to be a fundamentally strong growth story based on a double-digit square footage growth and an experienced management team.

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Avatar NetscribeRetail (< 20) Submitted: 5/30/07 6:49 AM

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In January 2007, Lowe’s Companies Inc planned to build a new flatbed distribution centre in the Port of Stockton, California, which is expected to begin shipping operations in the first half of 2007. An investment of $16 million is required including retrofitting of two existing 120000 sq ft facility. The distribution centre will supply products to more than 40 Lowe's retail stores in northern California, Nevada and Oregon.

Also during the same period, Lowe's Companies planned to expand into Mexico as a part of its long-term strategy, by opening up three to five stores in Monterrey in 2009. Each store would entail an investment of $18-$ 20 million. With homeownership rates in the Mexico growing at a rapid pace, Monterrey is viewed as a tremendous opportunity for offering Lowe's products and services to homeowners and commercial customers.

The company posted 2.1% increase in sales for the first quarter. However, earnings declined by 12.2%, as the company passed through a challenging environment including difficult housing markets. However, the company expects to open 150 to 160 stores in 2007 reflecting total square footage growth of approximately 11%, with total sales increasing by 7% for fiscal year ending February 1, 2008. Diluted earnings per share are expected to be $1.99 to $2.03 for the same period, representing a marginal increase. However, the initiatives taken above are expected to improve the top-line and bottom-line beyond management guidance for 2008. Thus considering the above factors, the share of Lowe’s Companies looks like a good pick for investor’s portfolio.

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