Lowe's sales fall nearly 2%, but it remains in a 'good position'

Dive Brief:

Lowe's on Wednesday said that fourth quarter sales fell 1.8% to $15.49 billion, down from $15.8 billion in the year-ago quarter, but its same-store sales increased 4.1%. Same-store sales in U.S. locations rose 3.7%, according to a company press release.
Lowe's fourth quarter net income fell 12.5% to $554 million, or 67 cents per share. Its adjusted earnings of 74 cents per share missed the analyst average forecast for 87 cents cited by Reuters.
In the full 2017 fiscal year, sales rose to $68.6 billion from $65 billion in fiscal 2016, and same-store sales for the year rose 4%. Same-store sales in its U.S. home improvement business rose 3.9% for the fiscal year, the company said.

Dive Insight:

Wall Street wasn't a good venue for Lowe's Wednesday morning as shares fell 8% in pre-market trades, but the home improvement retailer's results weren't as bad as all that, according to GlobalData Retail Managing Director Neil Saunders, who noted that much of the decline actually comes from one less week of trading compared to last year.

The same-store sales numbers tell the real story, and they reflect "reasonable rates of growth," Saunders said in an email to Retail Dive. Lowe's real trouble, he said, is that Home Depot's performance is overshadowing it.

Home Depot last week reported a fourth quarter revenue rise of 7.5% to $23.9 billion, and a same-store sales rise 7.5% over the year-ago quarter, beating analyst forecasts.

"Lowe's winter product offer was solid, its pricing was sharp, and its customer service remains good," according to Saunders. "However, when it comes to buying products, large numbers of shoppers automatically think of Home Depot and default to buying from either its website or its stores. In a lot of cases, Lowe's doesn't even get considered."

Lowe's also failed at the holidays, where Home Depot succeeded, and "the same logic applies to other events like outdoor grilling in summer, and winter home preparation in late fall," he said.

Still, Lowe's is in a "good position," according to GlobalData analysts, especially considering the strength of the housing market in particular and the U.S. economy overall. Unfortunately, even those factors are undermined by the retailer's relative weakness against its rival.

"It's just that the lion's share of growth will continue to flow to Home Depot, rather that its smaller rival," Saunders said.