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Money News

Online investments, staff pay weigh on Lowe's holiday-quarter profit view

(Reuters) - Lowe’s Cos Inc forecast holiday-quarter earnings below analysts’ estimates on Wednesday, as the company invests heavily in online business and benefits for employees working through the COVID-19 pandemic.

An employee uses a fork lift outside a Lowe's hardware store in Philadelphia, Pennsylvania, U.S. November 4, 2020. REUTERS/Mark Makela/Files

The home improvement chain’s shares, which have jumped over 33% this year on swelling sales of tools and building materials from people upgrading their homes, fell 5%.

To support the rush, Lowe’s has been putting money into upgrading supply chains to get in-demand products on shelves faster, and adding new online shopping features to better compete with larger rival Home Depot Inc.

Lowe’s spending on staff compensation has also risen significantly. It has already paid more than $800 million in COVID-19 related benefits, and is evaluating more financial assistance for employees in the fourth quarter.

It said it will also spend about $75 million on additional safety and cleaning measures at its nearly 2,000 stores.

Home Depot on Tuesday said it would boost employees’ wages by about $1 billion annually.

With the added expenses, Lowe’s expects earnings of $1.10 to $1.20 per share in the fourth quarter, compared with analysts’ estimates of $1.17 per share, according to IBES data from Refinitiv.

Chief Executive Officer Marvin Ellison said Lowe’s was “not really concerned about the short term” and was making investments in its supply chain, product assortments and new store layouts to boost productivity for the years ahead.

Lowe’s also said it expects to repurchase about $3 billion of stock in the holiday quarter.

Same-stores sales for the quarter are expected to rise about 15% to 20%, ahead of analysts’ expectation of a 9.6% increase, which indicates slower growth compared to the 30.1% surge in the third quarter.

Excluding items, the company earned $1.98 per share, slightly below estimates of $1.99 per share in the reported quarter.

Reporting by Uday Sampath in Bengaluru; Editing by Shinjini Ganguli

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