Why Home Depot Is Doing Better Than Lowe’s In 2016

by Trefis Team
-6.70%
Downside
320
Market
299
Trefis
HD
Home Depot
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Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) are the number one and two home improvement retailers in the U.S., holding 24% and 17% market shares, respectively. Both the retailers began the year well, with Lowe’s beating Home Depot’s comps in Q1, the first time since Q2 2010. However, Lowe’s’ performance stalled in the second and third quarters, as consumer spending at retailers became weak in general.

LOW Q&A 7-1

HD Q&A 12

While Home Depot managed to buck the trend of falling sales for retailers on increasing consumer spending on home improvement, Lowe’s missed growth estimates in Q3. Home Depot reaffirmed its guidance of 6.3% sales growth and 4.9% comp sales growth for 2016, and now expects full-year EPS to grow 15.9% to $6.33, up from the estimate of $6.31 after Q2, estimate of $6.27 after Q1, and estimate of $6.12-$6.18 after 2015 full-year results announcements. On the other hand, Lowe’s adjusted its previous estimate of 10% top line growth in 2016 to a 9-10% growth estimate, and adjusted its estimate of comp sales growth to 3-4% for 2016, down from an earlier estimate of 4% comp growth. Lowe’s’ sales growth estimate for 2016 is more than Home Depot’s 6.3% sales growth estimate, but this is as Lowe’s factored the inorganic growth of 4% due to the RONA acquisition, 0.5% growth due to opening of 45 stores, and 1.5% growth due to the inclusion of the 53rd week.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Home Depot

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