LOW Lowes Companies Inc

By Sarah Nassauer and Austen Hufford 

The strengthening U.S. economy and housing market boosted Lowe's Cos. in its latest quarter, as more consumers replaced household appliances and took on home-improvement projects.

The retailer's sales at stores open at least a year rose 4.2%, driven by an uptick in categories such as appliances, plumbing, lumber and lawn and garden.

"They feel it's a good time to invest in their homes again," said Chief Executive Robert Niblock in an interview Wednesday. "The opportunity is there, it just means you need to capitalize on the opportunity."

Lowe's said it expects the improving economic conditions to spur sales through 2017, shoring up what had been two weaker previous quarters for the company. Last November it cut its financial forecast for the year, citing a slightly slower spending environment.

Lowe's sales performance fell short of rival Home Depot Inc., which reported last week a 5.8% increase at existing stores for the quarter.

Still, Lowe's shares rose 9.5% in midday trading to $81.44.

The results "provides some comfort that the company is getting back onto a firmer growth trajectory after a period of relative softness and widening underperformance compared to Home Depot," said Global Data in a research note.

Many retailers are struggling to adapt as consumers increasingly shift their shopping online and away from physical stores. Target Corp. on Tuesday warned that its 2017 profit would be as much as 25% lower than Wall Street's forecasts.

Some retailers appear to be thriving, however, including Wal-Mart Stores Inc., which has invested heavily in its e-commerce capabilities, as well as Home Depot, which like Lowe's is benefiting from the resurgent housing market and rising property values.

Lowe's said the number of customer transactions rose 15% as the average each customer spent per sale rose 3.6%, mainly driven by more big-ticket appliance purchases. The company reported positive comparable sales in 12 of its 13 product categories.

Lowe's quarterly profit was helped by double-digit revenue gains, though it included about $84 million in severance-related costs.

So far this year it has laid off around 2,400 assistant store managers and 525 headquarters staff, Mr. Niblock said. The company is shifting its labor force to "best support where the consumer is going in the future," he said.

In all for the quarter, Lowe's earnings rose to $663 million, or 74 cents a share, from $11 million, or 1 cent a share. Revenue rose 19% to $15.78 billion.

For 2017, Lowe's said it expects to add 35 stores, grow comparable-store sales by 3.5% and post earnings per share of $4.64. As of Feb. 3, Lowe's operated 2,129 stores, up 15% from last year, largely from the purchase of Canadian home-improvement chain Rona Inc.

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

March 01, 2017 13:13 ET (18:13 GMT)

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