Lowe’s Stock Gains on New Initiative

September 16, 2020

Home improvement retailer Lowe’s Companies Inc (NYSE: LOW) saw its shares close 2.1% higher as the company announced a new partnership with reality TV show Shark Tank’s Daymond John. 

Aimed at helping entrepreneurs from diverse backgrounds get their product on the shelves of Lowe’s stores and in its online store, the company is aiming to help small businesses.

Tim’s Take:

If you’ve heard of massive big box home improvement store retailer Home Depot Inc (NYSE: HD), then you’ll be familiar with what Lowe’s does.

It’s the direct competitor to Home Depot in the home improvement space, selling everything from garden shovels to power drills.

The big two have done a great job of operating throughout the Covid-19 lockdowns, with their businesses relatively unscathed given their status as “essential businesses”.

This effectively allowed Lowe’s to remain open throughout and the company has really benefitted from the stay-at-home trend where people are intent on making their home more comfortable.

The latest initiative from Lowe’s is a great sign of the company’s environmental, social and governance (ESG) direction. With a focus on the “social”, Lowe’s has already committed US$55 million in small business grants to support minority-owned and women-owned businesses through the pandemic.

Catching up with Home Depot

Its latest announcement comes as CEO Marvin Ellison looks to gain ground on its bigger competitor, Home Depot.

So far in 2020, Lowe’s shares have actually outperformed – up 40% versus Home Depot’s 30% gain.

In its latest quarter, Lowe’s saw sales up a whopping 30.1% year-on-year to US$27.3 billion while its US comp sales increased an even more impressive 35.1% year-on-year. 

Even more surprising (and admirable) was the fact the company also managed to grow its gross margin and operating margin on a year-on-year basis.

Finally, Lowe’s is also a Dividend Aristocrat. It has paid rising dividends for an unbelievable 53 consecutive years, although it’s only yielding 1.4% at the moment. 

For long-term investors, though, the company could be a great addition to the “Dividend Growth” portion of their portfolios.

Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of Home Depot Inc.

This material is categorised as non-independent for the purposes of CGS-CIMB Securities (Singapore) Pte. Ltd. and its affiliates (collectively “CGS-CIMB”) and therefore does not provide an impartial or objective assessment of the subject matter and does not constitute independent research. Consequently, this material has not been prepared in accordance with legal requirements designed to promote the independence of research. Therefore, this material is considered a marketing communication.

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Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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