Why Lowe’s Failed to Meet Analysts’ Expectations in 2Q17

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Part 3
Why Lowe’s Failed to Meet Analysts’ Expectations in 2Q17 PART 3 OF 8

How Lowe’s 2Q17 Same-Store Sales Growth Outperformed Estimates

2Q17 performance

In 2Q17, Lowe’s (LOW) posted SSSG (or same-store sales growth) of 4.5% compared to analysts’ estimate of 4.3%.

How Lowe&#8217;s 2Q17 Same-Store Sales Growth Outperformed Estimates

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Lowe’s SSSG was driven by 0.9% from an improved transaction, while growth in average ticket size contributed 3.6%. On a monthly basis, Lowe’s SSSG stood at 0.6% in May, 5.3% in June, and 7.9% in July. During the quarter, the stores in the US posted SSSG of 4.6% with 13 out of 14 regions posting positive SSSG in all of their product categories.

Lowe’s SSSG was driven by compelling offers, improved messaging, and an integrated omnichannel experience. The SSSG on Lowes.com rose 43% due to the upgrading of its online shopping experience. Lowe’s has implemented improved product search, extended descriptions and specifications, integrated and upgraded product videos, and enhanced presentations to Lowes.com, which drove its online sales.

During the quarter, appliances, lumber building materials, lawn and garden, and rough plumbing and electrical have posted above-average SSSG. Due to seasonal demand, the SSSG of live goods and lawn care grew by double digits, while increased investment in customer experience drove the SSSG of the appliances category in the high single digits.

The improvement in assortment and expansion of brands to include SharkBite and A.O. Smith has helped Lowe’s to strengthen its sales from pro customers. Also, the company’s strong value proposition through “5 Ways to Save” and omnichannel offerings drove sales from pro customers across all categories.

Moving to international business, both Canada and Mexico posted mid-single-digit SSSG. During the quarter, the first RONA big-box store was converted to a Lowe’s branded store.

Peer comparisons

During the same period, Home Depot (HD) and Williams-Sonoma (WSM) posted SSSG of 6.3% and 2.8%, respectively.

Next, we will look at analysts’ revenue expectations.


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