Lowe’s (LOW)
The improving housing market is finally starting to spill over into other sectors of the economy. The downturn in the housing market has been blamed for triggering the events that sent the economy into a recession and now it has become one of the main things fueling the recovery. Other sectors of the economy that are intertwined with the housing market have started reaping some of the benefits of the recent recovery. Home improvement retailers definitely took a beating as people walked away from their homes and stopped purchasing properties altogether during the recession. Lowe’s became a victim of circumstances as the housing market spun out of control, but now the company is starting to see some light at the end of the tunnel. The second-largest US home-improvement retailer posted fourth-quarter profit that exceeded analysts’ estimates.
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Stock Analysis
For a while it appeared that Lowe’s was stuck in a downward spiral with the housing market. As the housing market started to make baby steps in the right direction, Lowe’s continued to have issues. Quarter after quarter the company watched sales and profits decreased, missing analysts’ expectations. The company was forced to make cutbacks and even close some stores that had been open less than a year. After perseverance and additional improvements in the housing market, the company’s fourth-quarter results shaped up better than expected. According to the report, net income rose 27 percent to $205 million, or 14 cents a share, from $162 million, or 11 cents, a year earlier. Lowe’s also said sales in stores open at least 13 months may advance as much as 3 percent this year thanks to a 2.8 percent January increase in U.S. housing starts.
Lowe’s may have been able to finish 2009 on a better note, but the company’s future is still uncertain. The housing market is definitely in a better place than it was a year ago, but it remains shaky nonetheless. A move in the wrong direction has the potential to erase some of the progress that the market has made and that could mean another round of declines for home improvement retailers. Retailers in general are still on a spinning wheel of uncertainty as the economy tries to improve. The country may not be in a recession anymore, but consumers are still dealing with the lingering effects. Let’s not forget that unemployment has surged to record levels and most analysts are expecting the recovery in the jobs market to take years. If people do not have jobs, they will definitely not be building of improving homes.
Chief Executive Robert Niblock thinks the worst of the economic cycle is behind the company. He said “while the psychological impact of falling home prices and an uncertain employment picture continue to weigh on consumers, improving comparable-store sales trends, including improvement in many bigger-ticket, project categories, provides an encouraging sign that consumers are gaining the confidence to take on more discretionary projects.” The company will still need to execute caution in future quarters because its earnings can fall back into negative territory with the flip of a switch. Lowe’s climbed 59 cents to $23.72 during morning trading.
Other Stuff on Lowe’s
- Lowe’s Expands Benefits – The company is offering employees nationwide incentives in the form of reduced out-of-pocket costs to come to the Cleveland Clinic for heart procedures.
- Lowe’s customers donate $630K to Haiti – Lowe’s Cos. Inc. customers have donated more than $630,000 to the Red Cross’ relief efforts for victims of the recent earthquake in Haiti.
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