Author: ToddSullivan

It is coming down to one thing for Lowe’s (LOW), market share.

Lowe’s continued to capture market share in Q1. During the quarter, they gained 70 basis points of total unit market share according to third-party sources (gained unit market share in 15 of our 19 product categories).

Larry D. Stone, COO
“I am also encouraged by our draw rate, or the number of times Lowe’s [was in the consideration set] of customers buying the products we sell. Of our 19 categories, draw rates improved in 17, stayed flat in one, and declined slightly in one in the first quarter. These solid results suggest that we are moving ever closer to achieving our vision of become the customer’s first choice for home improvement.”

Other Notes:
* No shares repurchased in the first quarter and our current plans do not contemplate any share repurchases for fiscal 2008.
* Cash flow from operations exceeded $2.5 billion, which represents a $399 million, or 18.7% increase over Q1 2007
* Expect diluted earnings per share of $1.45 to $1.55 for the year.
* Saw improvement in the negative comps in Gulf Coast and Florida over 2007 and that improvement continued into the first quarter of 2008.

It was more than a little disappointing that not a single question on the call from the “analysts” dealt with market share. Rather they focused obsessively on comp. sales. Guys, they will not be good until housing turns, unless you have a crystal ball that tells you when that will be, move on and ask something important.

Market share is what matters here. In a two horse race and this is essentially what it is, the company that performs the best when the environment improves will be the one gaining a larger piece of the total pie. With quarter after quarter of market share gains and now consumer awareness ones also, the winner will clearly be Lowe’s.

With both HD and Lowe’s trading at essentially the same premium to earnings, if one is looking to invest, where would you put your money? The company closing locations and losing market share or the one gaining share and opening new locations at a disciplined rate? Would you invest in the one with a clearly defined plan from management or the one who seems to make decisions based on what they see today?

Me too..

Full earnings call transcript here:
Disclosure (“none” means no position):

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At the National Conference on Public Employee Retirement Systems Annual Conference, New Orleans, Louisiana, Fed Vice-Chair Kohn gave the following outlook this morning.

“The Economic Outlook
Although the current financial and economic situation remains quite difficult, I believe that the most likely scenario over the next year or so is one in which economic activity firms during the second half of this year and then gathers some strength in 2009. In the near term, consumer spending is likely to receive a boost from the rebates that are now flowing to taxpayers. Although the timing and the magnitude of the spending response are uncertain, economic studies of the previous experience suggest that a noticeable proportion of households respond reasonably quickly to temporary cash flows. Of course, the stimulus to domestic production will depend on the extent to which the additional demand is met by a temporary drawdown of inventories or an increase in imports rather than by an expansion in domestic output. But to date, businesses appear to be keeping tight control on inventories, and a reasonable assumption is that we will see a temporary lift to the economy in coming months.

The pace of activity should continue to improve next year, with an important part of the gains coming from the abatement of the forces currently restraining activity. That said, a number of factors suggest that the recovery could be relatively moderate. I’ve already mentioned my expectation that financial market functioning and risk appetites will continue to improve, but that recuperation will require some time. As all that happens, the policy easing the Federal Reserve has put in place over recent months will begin to show through more in reductions in the cost of capital and the greater availability of credit. The demand for housing is not likely to rebound substantially for a while after this episode, but the drag on growth from declining activity and prices in the housing market will ebb as excess inventories are worked off and affordability improves. Consumption should pick up along with the improvement in jobs and income, though a gradual increase in the saving rate would be expected now that households will no longer be counting on increases in the value of their homes to finance retirement or other future spending. With a lag, business investment should turn up as prospects for a sustained expansion of economic activity become clearer. And both households and businesses should benefit from a leveling-off in the prices of energy and other commodities along the path implied by futures markets.”

Inflation
“My expectations for moderating inflation and limited spillover effects from commodity price increases depend critically on the continued stability of inflation expectations. In that regard, year-ahead inflation expectations of households have increased this year in response to the jump in headline inflation. Of greater concern, some measures of longer-term inflation expectations appear to have edged up. If longer-term inflation expectations were to become unmoored–whether because of a protracted period of elevated headline inflation or because the public misinterpreted the recent substantial policy easing as suggesting that monetary policy makers had a greater tolerance for inflation than previously thought–then I believe that we would be facing a more serious situation.”

Full text:

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Visit the ValuePlays Bookstore for Great Investing Books

At the National Conference on Public Employee Retirement Systems Annual Conference, New Orleans, Louisiana, Fed Vice-Chair Kohn gave the following outlook this morning.

“The Economic Outlook
Although the current financial and economic situation remains quite difficult, I believe that the most likely scenario over the next year or so is one in which economic activity firms during the second half of this year and then gathers some strength in 2009. In the near term, consumer spending is likely to receive a boost from the rebates that are now flowing to taxpayers. Although the timing and the magnitude of the spending response are uncertain, economic studies of the previous experience suggest that a noticeable proportion of households respond reasonably quickly to temporary cash flows. Of course, the stimulus to domestic production will depend on the extent to which the additional demand is met by a temporary drawdown of inventories or an increase in imports rather than by an expansion in domestic output. But to date, businesses appear to be keeping tight control on inventories, and a reasonable assumption is that we will see a temporary lift to the economy in coming months.

The pace of activity should continue to improve next year, with an important part of the gains coming from the abatement of the forces currently restraining activity. That said, a number of factors suggest that the recovery could be relatively moderate. I’ve already mentioned my expectation that financial market functioning and risk appetites will continue to improve, but that recuperation will require some time. As all that happens, the policy easing the Federal Reserve has put in place over recent months will begin to show through more in reductions in the cost of capital and the greater availability of credit. The demand for housing is not likely to rebound substantially for a while after this episode, but the drag on growth from declining activity and prices in the housing market will ebb as excess inventories are worked off and affordability improves. Consumption should pick up along with the improvement in jobs and income, though a gradual increase in the saving rate would be expected now that households will no longer be counting on increases in the value of their homes to finance retirement or other future spending. With a lag, business investment should turn up as prospects for a sustained expansion of economic activity become clearer. And both households and businesses should benefit from a leveling-off in the prices of energy and other commodities along the path implied by futures markets.”

Inflation
“My expectations for moderating inflation and limited spillover effects from commodity price increases depend critically on the continued stability of inflation expectations. In that regard, year-ahead inflation expectations of households have increased this year in response to the jump in headline inflation. Of greater concern, some measures of longer-term inflation expectations appear to have edged up. If longer-term inflation expectations were to become unmoored–whether because of a protracted period of elevated headline inflation or because the public misinterpreted the recent substantial policy easing as suggesting that monetary policy makers had a greater tolerance for inflation than previously thought–then I believe that we would be facing a more serious situation.”

Full text:

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Visit the ValuePlays Bookstore for Great Investing Books