Analyst Note| Jaime M. Katz, CFA |
Wide-moat Lowe’s has benefited from shelter-in-place orders, as one of the few brick-and-mortar retailers deemed essential, which has kept boxes open. The firm handily outpaced our forecasts, posting 11.2% same-store sales (versus our 3% estimate), 11% total sales growth (3%), and an operating margin of more than 10% (9%), marking the best first-quarter operating margin in the last decade. This more than 200 basis points of operating margin expansion was captured despite $340 million in COVID-19-related costs (higher pay for front line workers, enhanced cleaning, paid time off, and more). Additionally, e-commerce seemed to keep pace with wide-moat Home Depot, with sales in the channel rising 80%, as efforts to redesign the e-commerce site appear to be paying off.