Lowe's forecasts 2017 sales ahead of estimates; shares up

[March 01, 2017]  (Reuters) - Lowe's Cos Inc <LOW.N> forecast 2017 sales ahead of analysts' estimates and reported better-than-expected quarterly comparable-store sales as consumers continued to spruce up their homes or buy new ones.

Shares of the No. 2 U.S. home improvement retailer rose 7.4 percent to $79.88 in premarket trading on Wednesday.

Homebuilding in the United States jumped 11.3 percent in December as a firming economy and higher wages due to a tightening labor market boosted demand for housing.

Increase in the value of homes and stable fixed-rate mortgages have spurred remodeling activity by homeowners.

Lowe's has been underperforming compared with larger rival Home Depot Inc <HD.N> in the past several quarters, mainly as Lowe's focused on its do-it-yourself customers.

Home Depot reported higher-than-expected holiday-quarter comparable store sales of 5.8 percent in February, helped by strong demand for big-ticket items such as appliances and flooring products.

Mooresville, North Carolina-based Lowe's gets one-third of its total sales from professional customers or big-ticket items, while Home Depot gets 40 percent of its revenue from them.

Lowe's forecast 2017 sales to increase about 5 percent, which equates to $68.27 billion. Analysts on average were expecting $64.60 billion, according to Thomson Reuters I/B/E/S.

The company also forecast its comparable-store sales to rise 3.5 percent in 2017.

Sales at Lowe's stores open for more than 13 months rose 5.1 percent in the fourth quarter ended Feb. 3, above the average analyst estimate of a rise of 2.2 percent, according to analysts polled by research firm Consensus Metrix.

An employee restocks items at a Lowe's home improvement chain in Austin, Texas, U.S., February 27, 2017. REUTERS/Mohammad Khursheed

Lowe's operated 2,129 home improvement and hardware stores in the United States, Canada and Mexico as of Feb. 3 and said it expected to add about 35 stores in 2017.

Net sales increased 19.3 percent to $15.78 billion during the holiday quarter. Analysts on average had expected $15.39 billion.

Net earnings rose to $663 million, or 74 cents per share, in the latest quarter, from $11 million, or 1 cent, in the year-ago period, when the company took a non-cash charge of $530 million related to its decision to exit its joint venture in Australia with Woolworths Ltd.

Excluding certain items, the company earned 86 cents per share. Analysts on average had expected 79 cents per share, according to Thomson Reuters I/B/E/S.

(Reporting by Gayathree Ganesan in Bengaluru; Editing by Sriraj Kalluvila and Martina D'couto)

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