Lowe's CEO: Macro environment bodes well for home improvement

Feb. 23, 2022 10:43 AM ETLowe's Companies, Inc. (LOW)HDBy: Brian Stewart, SA News Editor5 Comments

Lowe"s Home Improvement Warehouse. Lowe"s operates retail home improvement and appliance stores in North America I

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Lowe's CEO Marvin Ellison said Wednesday that the macroeconomic climate remains hospitable for the home improvement retailer, leading to its Street-beating financial results for the latest quarter.

"We feel good about the macro environment specific to home improvement," the head of Lowe's (NYSE:LOW) told CNBC, citing a large stockpile of savings consumers have built up during the pandemic.

Ellison also pointed to dynamics in the housing market for its strong results, noting continued home price appreciation, which gives homeowners the "confidence to invest in their homes." In addition, he noted an undersupply situation in the housing market, as well as an aging housing stock, saying this would spur demand for maintenance and repairs.

Lowe's (LOW) rallied about 3% in Wednesday's intraday trading following the release of better-than-expected Q4 results. The company beat projections on both its top and bottom lines. The firm also gave a solid forecast for 2022.

The reaction to LOW's earnings report stood in stark contrast to rival Home Depot (NYSE:HD), which dropped nearly 9% on Tuesday in the wake of its quarterly update. While HD exceeded expectations with its latest results, the company said its 2022 comparable sales growth would be only "slightly positive." The firm also warned about ongoing volatility in lumber prices.

HD's poorly received report also put pressure on LOW, which dropped about 4% in sympathy. This marked the fourth consecutive day of declines for the stock -- meaning that Wednesday's post-earnings rally only regained some of its recent losses.

In his CNBC interview, Ellison pushed back on the idea that demand for home improvement would decline following the pandemic. Instead, he argued that the ongoing work-from-home trend and the general focus on homes generated by the COVID lockdowns will lead to an ongoing culture of home improvement.

Commenting on the supply chain situation, the Lowe's CEO contended that the firm's scale allowed it to sidestep some of the bottlenecks faced by other retailers.

"It's obviously still a challenging environment, but I do believe because we're such a large importer of goods and we have so much scale that we've had the ability to perform much better than other retailers," he said.

For more on the long-term prospects for both LOW and HD, read a deep dive by SA contributor Anthony Cataldo, who says these "cash flow machines" offer a great buy-and-hold opportunity.

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