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Lowe's Companies Inc LOW

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Lowe’s Helped by Stay-at-Home Orders as Customers Spend on DIY Projects; Shares Slightly Overvalued

Jaime M. Katz, CFA Senior Equity Analyst

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.

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Company Profile

Business Description

Lowe's is the second- largest home improvement retailer in the world, operating about 1,970 stores throughout the United States and Canada. The firm's stores offer products and services for home decorating, maintenance, repair, and remodeling. Lowe's targets retail do-it-yourself and do-it-for-me customers as well as commercial business clients. We estimate that Lowe's captures a low-double-digit share of the domestic home improvement market, based on U.S. census estimates for market size.

1000 Lowe's Boulevard
Mooresville, NC, 28117
T +1 704 758-1000
Sector Consumer Cyclical
Industry Home Improvement Retail
Most Recent Earnings Apr 30, 2020
Fiscal Year End Jan 31, 2021
Stock Type Cyclical
Employees 320,000