We know Lowe's (NYSE:LOW) is likely to post accelerating growth when it reveals its third-quarter numbers on Tuesday, Nov. 21. After all, the retailer benefited from the same string of natural disasters -- hurricanes, earthquakes, and wildfires -- that lifted comparable-store sales to a multiyear high at Home Depot (NYSE:HD).

Below, we'll look at a few other things investors can expect from Lowe's quarterly announcement.

A cart sits in a home improvement store aisle.

Image source: Getty Images.

Customer traffic trends

The home improvement retailer's latest forecast calls for comparable-store sales, or comps, to rise by 3.5% for the full year to continue the same pace executives managed through the first six months of 2017. That prediction came before the many natural disasters that caused widespread damage across its sales base in the U.S. and Mexico, though. Due to those events, Home Depot's comps sped up to a blistering 7.9% pace from 6.3% in the prior quarter. It's likely Lowe's will announce a similar bump on Tuesday.

But the more important number to watch will be customer traffic. Lowe's posted a 0.3% decrease in this metric over the first half of the year while Home Depot's traffic improved by 2.2%. Lowe's management team is determined to close that gap, and so they launched a few initiatives aimed at attracting customers, including by extending store hours. We'll find out on Tuesday whether those strategies allowed the company to climb back toward steady, or improving, market share, given that Home Depot managed another healthy 2.5% traffic improvement for the third quarter.


There might be a stiff price to pay for that sales boost. Lowe's CEO Robert Niblock warned investors back in August that management's traffic initiatives would likely hurt profitability. Hurricane-related sales probably had the same effect. They reduced Home Depot's gross profit by over $50 million, after all.

LOW Operating Margin (TTM) Chart

LOW Operating Margin (TTM) data by YCharts.

Home Depot is a far more profitable business today, with operating margin approaching 15% of sales this year. Lowe's comparable figure is 11%, but the gap between these rivals could grow over the coming quarters as Lowe's prioritizes sales growth over earnings.

The new forecast

Lowe's will update its 2017 forecast on Tuesday and all signs point to higher targets for both sales and profits. Home Depot raised its comps outlook by a full percentage point and now sees revenue growth of 6.5% rather than the 5.5% it predicted back in August. It also boosted its per-share earnings forecast -- to 14% -- while adding $1 billion to its $7 billion capital return plan. In a conference call with analysts, Home Depot said healthy trends in the home improvement market are supporting the business while hurricane rebuilding efforts should lift results through at least the first half of 2018.

All these factors should brighten Lowe's outlook, too, but the scale of its operating upgrade will tell investors a lot about how well the company is capitalizing on the positive trends in the industry in comparison to its larger rival.

A modest increase from the current 3.5% target would suggest Lowe's is still struggling to end its market share losses. A head-turning hike, on the other hand, that's closer to Home Depot's 6.5% forecast, would mean the industry leader has a growing competitive threat on its hands.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool has the following options: short January 2018 $170 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.