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Earnings Preview: Lowe’s marketing, merchandising efforts to pay off in Q1

When Lowe’s Companies (Nasdaq: LOW) reports March-quarter results early Wednesday morning, it is expected to demonstrate improved operational efficiency aided by the management’s efforts to bring innovation and improve merchandising. Sales are expected to get a boost from the expanding supply chain and strong customer engagement.

The management remains cautious not to allow the recent decline in store count to impact sales and has launched several promotional programs under its revised marketing strategy, besides broadening the merchandise assortment. Betting on the long-term benefits of the initiatives, the company forecasts a 3% increase in comparable store sales and a 2% revenue growth for fiscal 2019.

Lowe's Q4 2018 earnings infographic

The favorable factors, combined with the ongoing cost-cutting program and efforts to improve cash flow generation, could drive the results beyond the market’s expectations this time, as they did in the trailing three quarters.

The favorable factors could drive the results beyond the market’s expectations this time, as they did in the trailing three quarters

According to market watchers, revenues are poised to rise by 2% year-on-year to $17.7 billion in the first quarter, driving net earnings up by 12% to $1.34 per share. While the top-line stands to benefit from the continuing uptrend in same-store sales, growth could be restricted by the decline in the store count as the company keeps exiting non-profitable locations.

In the fourth quarter, revenues edged up 1% to $15.6 billion but missed the estimates. The bottom-line, when adjusted for non-recurring items, moved up 8% to $0.80 per share and came in line with the Street’s projection.

Related: Lowe’s Q4 2018 Earnings Conference Call Transcript

Taking the efforts to ramp up its digital prowess one step forward, Lowe’s this week acquired Boomerang Commerce’s retail analytical platform. Once fully integrated, it will help the company make informed decisions on pricing and merchandise assortment. In the previous quarter, Lowes.com registered a double-digit comparable sales growth amidst solid traffic growth.

Among others in the home improvement sector, Home Depot (HD) is all set to release first-quarter earnings Tuesday before the market opens, with analysts forecasting a 5.3% rise in earnings to $2.19 per share on revenues of $26.39 billion.

Lowe’s shares made a strong comeback in the early weeks of the year after retreating from last year’s record high. Currently, they are once again trading near the peak. The stock has gained 13% so far this year and 18% in the past twelve months.

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