By Tonya Garcia, MarketWatch
Lowe's is gaining market share as COVID-19 drives consumer spending to home improvement
Lowe's Cos. second-quarter results got a bump from professional tradespeople, a group that usually favors the home improvement retailer's main competitor, Home Depot Inc. (HD)
Lowe's (LOW) reported profit and sales () that were well ahead of expectations, and U.S. same-store sales growth of 35.1%, triple the 11.9% rise FactSet forecast.
Comparable sales in the professional category were up in the mid-20% range.
Lowe's is taking aim at professionals with new initiatives and efforts designed for these shoppers, including a partnership with Stream for a free augmented reality video chat service called JobSight. Launched on June 1, it allows professionals to meet with clients virtually, a feature that's particularly suited to the coronavirus pandemic ().
Read:Transactions of $1,000 or more grew 16% at Home Depot during the second quarter ()
For professional loyalty customers, there's a free one-year subscription to Home Advisor that comes will job leads and access to experts.
And Lowe's is launching a tool rental program that will start rolling out in Charlotte on Aug. 20.
"As over 70% of pros are currently utilizing tool rental programs, this will provide a meaningful opportunity for Lowe's to deepen our relationship with this customer segment," said Joseph McFarland, Lowe's executive vice president of stores, according to a FactSet transcript of the Wednesday earnings call.
Lowe's stock has gained 32.4% for the year to date, while the S&P 500 index is up 4.8% for the period.
"Lowe's has traditionally been a DIY [do-it-yourself] heavy business, but their investments in the pro space may enhance growth in this segment since it is likely that DIY customers may shift their share of wallet back to travel and eating out once the pandemic subsidies," wrote Raymond James in a note.
Analysts think Lowe's could be setting itself up for gains in fiscal 2021. Raymond James rates Lowe's stock market perform.
Truist Securities also think the professional category will be key to Lowe's turnaround.
"Lowe's has started to see substantially faster growth than peer Home Depot," analysts led by Keith Hughes said. "We attribute the brand focus and store execution of Lowe's as a driver, in addition to finally seeing better online and pro sales."
Truist rates Lowe's shares buy with a $178 price target.
See:Target reports record-setting quarterly profits and comparable sales, $5 billion in market share gains for the first half of 2020 ()
Even with its existing strength with DIY shoppers, GlobalData Retail thinks there's still room for Lowe's to take share in this category as well.
"Home improvement shoppers, especially ones who do not regularly shop the sector, have been more focused on practical matters like convenience, availability, and how easy it is to use apps and websites," wrote Neil Saunders, GlobalData managing director, in a note.
"This shift has been beneficial for Lowe's. It has created some churn where Lowe's has picked up consumers who would usually visit Home Depot and it has also allowed Lowe's to secure a good share of new home improvement buyers."
-Tonya Garcia; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
August 22, 2020 08:42 ET (12:42 GMT)
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