Lowe’s Misses Earning Expectations Despite Rise in Product Demand

Lowe’s Cos Inc, the number two home improvement chain in the United States, posted their second quarter earnings report for 2015 on Wednesday, August 19th. The report shows that the company failed to hit their earnings expectation, but reported a 4.5% increase in quarterly sales due to the increase of sales for large appliances.

Lowe’s biggest sellers are its large appliances, such as refrigerators, dishwashers, and washing machines. Other items that have been popular during the second quarter are outdoor power equipment, such as generators, chainsaws, or branch trimmers.

CNBC reports that Lowe’s shift in bigger-ticket item sales is likely the reason for the weakness in gross margins. The higher-priced items typically have smaller margins. This means that they boost revenue, but hurt profitability.

Despite the currently weak retail environment, home improvement stores have consistently stayed busy. More than 60% of homeowners are prepared to spend more in 2015 than they were in the previous year.

”Economists are forecasting a modest acceleration in both incomes and spending this year,” Said Lowe’s Chief Executive Robert Niblock in a recent conference call with Reuters. He believes that as the housing market continues to recover, more homeowners will invest money into their homes.

Lowe’s posted an overall profit of $1.13 billion dollars during their second quarter. While their earnings may not have been as high as they expected, Lowe’s saw a growth from last year’s report of $1.04 million.

Home Depot, Lowe’s biggest competitor, also posted its quarterly review. Similar to Lowe’s, Home Depot was also able to raise their sales do to an increase of large appliance sales. However, Home Depot was also able to raise their profits.

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