Lowe’s beats expectations

From The Wall Street Journal:

Lowe’s Profit Up 26%, Boosts Outlook

Home Improvement Company Beats Analyst Expectations on Strong Demand

The counters are done, the countertops installed, backsplash has been tiled, and the microwave/ range hood installed. That’s my favorite wife at the range, but the counters hadn’t been cleaned of construction debris from hanging the microwave when this picture was taken. There is still more work to do. (Click photo to enlarge.)

By Saabira Chaudhuri | August 21, 2013, 7:04 a.m. ET

Lowes Cos. fiscal second-quarter earnings jumped 26%, beating analyst expectations, as the home improvement retailer logged double-digit percentage growth in revenue, buoyed by an improving housing market.

The company also raised its financial outlook for the year, now expecting per-share earnings of $2.10 on sales growth of 5% and same-store sales growth of 4.5%. Its previous expectation was for share earnings of $2.05 on sales growth of 4% and same-store sales growth of 3.5%.

Chief Executive Robert A. Niblock characterized home improvement demand as strong during the quarter ended Aug. 2, for which Lowe’s reported a profit of $941 million, or 88 cents a share, compared with a profit of $747 million, or 64 cents a share, a year ago. The year-earlier period included a one-cent charge related to staff reductions at the company’s U.S. headquarters and a three-cent charge tied to a calendar shift.

Analysts polled by Thomson Reuters had predicted per-share earnings of 79 cents on revenue of $15.07 billion.

Net sales were up 10% to $15.71 billion, while same-store sales were up 9.6%. Gross margin widened to 34.4% from 33.9%.

More at the link.

Your Editor would like to take some credit for Lowe’s beating earnings estimates for the second quarter, having spent thousands of dollars at the Lowe’s store in Lehighton, Pennsylvania this spring and summer. When you look at the picture of my darling bride (of 34 years, three months and two days) getting the garlic bread ready for dinner last Sunday, you are also looking at quartz countertops and a microwave range hood purchased from Lowe’s. The cabinets did not come from Lowe’s; we saved about $1,200 by going to a discounter for those. The new drywall came from Lowe’s, as did the paint on the walls, as did the floor tiles, and the electrical wiring, lights and receptacles. But even Alison Victoria liked the kitchen:

There is still a lot more to do. I have to finish trimming out the new window, and there’s more painting and trim work to be done.

If a story about our life personally seems a bit strange, remember that The First Street Journal is (almost) as much of an economics blog as it is a political one, and your Editor sees the economics behind the Wall Street Journal original as important: it means that homeowners are investing more in their homes than previously.

Nor is Lowe’s the only beneficiary: the stock chart to the left indicates that Home Depot has also been doing a lot better. Those ate the two biggest of big box retailers for home improvement material. (The new window you can see came from Home Depot.)

The United States’ economy is slowly improving. It has not been as fast as we would have liked, but it is steady and sustainable, and your Editor credits that to the Republicans in Congress having halted President Obama’s economic meddling dead in its tracks. Since the GOP won control of the House of representatives in the 2010 elections, they have reduced the scope of the automatic tax increases which would have taken effect at the beginning of this year, enforced the supposedly unacceptable federal spending sequester, and that has pushed down the federal deficit; it is projected to be under $700 trillion for FY2013. Had President Obama gotten his way, the deficit would have been much higher — he wanted to cancel the sequester completely — and we’d have been facing even higher debt service costs in the future. Having a Democratic President means that spending is still too high, but at least it isn’t as high as it could have been, and the Republicans have stymied almost all new programs. The liberals will claim that the recovery would have been faster had the Republicans not stopped things, but the economy has had its stronger recent performance since 2011, when the Republicans came into office.

What the economy has done has not made much of a dent in unemployment, but it has left people who had weathered the recession with their jobs intact confident enough to start to spend money again, and one of the best returns on investment can come in increasing the value of their homes.1
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  1. Our kitchen wasn’t meant to be an investment to increase the value of our home for resale; it was simply to make our kitchen better!