Home-building retailers Home Depot and Lowe’s had a phenomenal quarter, but investors are not in the mood to enjoy the profits.
Home Depot sales grew by 23.4% in the quarter ended August 2. From last year, while Lowe’s revenue jumped 30% in the quarter ending July 31. Both companies have exaggerated the estimated income of analysts by about 10%. Diluted earnings per share increased 75% year-over-year at Lowe’s and 26.8% at Home Depot. However, shares of Home Depot have been down about 2% since the reported Tuesday morning earnings, and Lowe’s was basically flat after reported Wednesday.
As in the previous quarter, sales to self-employed consumers have outpaced those to professional contractors at both retailers. Lowe’s benefited more from this trend because DIY customers are a higher part of their business. Interestingly, the growth in sales in all U.S. regions was for both companies and was not correlated with the size of Covid-19 outbreaks, which bodes well for the rest of the year.
Many of the concerns seem to be round about how sustainable their impressive sales can be. Both are mature businesses and it is clear that much of the growth in demand is specific to the Covid-19 pandemic, as consumers spend more time at home and spend less on other discretionary categories, such as travel.
Profits from the market share at the expense of smaller competitors, however, seem to have benefited both companies – because larger chains like these were able to maintain shelves well. Lowe Chief Executive Marvin Ellison said in a call Wednesday morning that it would have been difficult to increase revenue so much without gaining market share.
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