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Understanding Lowe’s Low 1Q17 Same-Store Sales Growth

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Same-store sales growth

Expressed as a percentage, SSSG (same-store sales growth) measures any rise or fall in revenue from company’s existing stores over a certain period of time. SSSG is driven by a rise in traffic and ticket size.

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LOW’s 1Q17 performance

For 1Q17, Lowe’s Companies (LOW) posted SSSG of 1.9%, as compared to the analysts’ estimate of 2.9%. The increase in average size has contributed 3.5% to LOW’s SSSG, while the decline in traffic impacted SSSG by -1.5%. On a monthly basis, the company posted SSSG of 3.8%, -1.2%, and 4% in February, March, and April, respectively.

The company posted SSSG of 2% in the US, with 12 of 14 regions posting positive SSSG. Outside of the US, the company posted double-digit SSSG in Mexico, while the SSSG was flat in Canada. SSSG in Canada was negatively impacted by unusually high snowfall.

Categories and segments

The company posted positive SSSG in eight of 11 product categories. The company blamed tough 1Q16 comparisons and lower outdoor sales for lower-than-expected SSSG. Lowe’s claimed that early in the quarter, the messaging was heavily weighted toward indoor categories, which led to weak outdoor sales.

Lowe’s SSSG was driven by strong sales from Pros customers, appliances, kitchens, and flooring. Notably, to enhance the customer experience, the company has developed appliance suites, where customers can visualize their remodeled kitchen.

The company has also enhanced its online experience on Lowes.com by simplifying the product selection process and adding online scheduling capabilities. These initiatives along with targeted marketing have driven SSSG by 27% on the website.

As part of its omnichannel strategy, the specialists at Lowe’s stores are serving do-it-for-me customers by helping them design, plan, and manage their projects.

Peer comparisons

During the same period, Home Depot (HD) and Williams-Sonoma (WSM) posted SSSG of 5.5% and 0.1%, respectively.

Next, we’ll look at analysts’ revenue estimates for the next four quarters.

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