Why Analysts Expect Lowe’s Revenue to Rise in 3Q17
Analysts expect Lowe’s Companies (LOW) to post revenue of $16.56 billion in 3Q17, which represents growth of 5.2% from $15.74 billion in 3Q16. The revenue growth is expected to be driven by the acquisition of Central Wholesalers and Maintenance Supply Headquarters as well as the opening of new stores and positive SSSG (same-store sales growth).
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By the end of 2Q17, Lowe’s operated 2,141 stores, compared to 2,119 in 3Q16. The addition of these new stores together with stores opened in 3Q17 is expected to drive Lowe’s revenue in 3Q17.
Lowe’s acquired Central Wholesalers in November 2016 and Maintenance Supply Headquarters in May 2017, which are expected to expand the company’s professional customer reach and also improve its ability to serve the multi-family housing industry with expanded products and services.
Moving to SSSG, analysts expect Lowe’s SSSG to be driven by an increase in the breadth of its assortment, enhancements to its customer experience through the implementation of technological advancements, and marketing and promotional initiatives.
The company has introduced a new floor tile tool that displays different style options and also simplifies the shopping experience as customers can visualize how the new floor looks in their home. The company has also introduced Scott Living indoor furniture with coordinated collections from Drew and Jonathan Scott of HGTV’s Property Brothers.
The company has been focusing on improving the omnichannel experience by making it easier for customers to engage with its interior and exterior project specialists using Lowes.com. Also, through the implementation of refined search algorithms, improved product and content recommendations, expanded product views, enhanced presentations like 360-degree views, and optimized functionality features on Lowes.com are expected to drive the company’s online sales.
The company’s revenue is expected to be driven by the favorable macro environment, which includes the rise in the housing price index, higher housing turnover, lower unemployment, and a rise in labor wages.
Lowe’s management expects its revenue to rise 5.0% in 2017 with SSSG contributing 3.5%, the RONA acquisition contributing 2.0%, and the addition of 25 new stores to contribute 1.0% to the company’s revenue. However, some of the revenue growth is expected to be offset by one fewer week of operations in 2017 compared to 2016.
For the next four quarters, analysts are expecting Lowe’s to post revenue of $69.89 billion, which represents a growth of 3.0% from $67.88 billion in the corresponding four quarters of the previous year.
Next, we’ll look at Lowe’s 3Q17 EPS estimate.