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Why Lowe’s Same-Store Sales Growth Came Up Short

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Third-quarter performance

Lowe’s Companies (LOW) posted SSSG (same-store sales growth) of 1.5%, which fell short of analysts’ expectation of 2.9%.

In a statement, Lowe’s CEO Marvin Ellison stated, “During the quarter, the favorable macroeconomic environment, combined with great values, drove traffic to our stores and website. However, continued challenges with inventory out of stocks, poor reset execution, and assortment concerns in certain categories pressured our ability to turn those visits into transactions.”

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Lowe’s SSSG was driven by a 2.3% rise in average ticket size, partially offset by a 1.0% decline in traffic. Hurricane-related sales in the corresponding quarter of 2017 had a negative impact of 1.0% on the company’s SSSG in Q4 2018. However, the company’s inventory rationalization initiative contributed 0.15% to its SSSG.

On a monthly basis, Lowe’s posted SSSG of 4.0% in August, 0.7% in September, and 0% in October. In the United States, the company posted SSSG of 2.0%, with 11 of the 14 geographical regions posting positive SSSG. Lowe’s website’s SSSG rose 12%.

Lowe’s posted positive SSSG in seven of its 11 merchandising departments. Appliances, kitchens and rough plumbing, seasonal and outdoor living, lawn and garden, and electrical department posted above-average SSSG.

The company launched products by Mapei, a producer of adhesives and sealants for building, and Zoeller Pump Company. Lowe’s also introduced pro cordless power tools from both Bosch and Metabo during the quarter.

Peer comparison and outlook

Home Depot (HD) and Williams-Sonoma (WSM) posted SSSG of 4.8% and 3.1%, respectively.

For 2018, Lowe’s management lowered its SSSG guidance to 2.5% from 3.0%.

Next in this series, we’ll look at Lowe’s third-quarter net margin.

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