Lowe's (NYSE:LOW) reported fourth-quarter results this week, showing a year-over-year decreases in sales and a 4.1% increase in comparable-store sales in the quarter that was a week shorter than last year's. The retailer is forecasting a slowdown in sales growth in 2018 and a slight dip in comps growth.

More on that conservative outlook in a moment. First, here's how the headline results stacked up against the prior-year period:


Q4 2017

Q4 2016

Year-Over-Year Growth


$15.5 billion

$15.8 billion


Net income

$554 million

$663 million


Earnings per share




Data source: Lowe's financial filings.

What happened with Lowe's this quarter?

A customer tries out an electric drill.

Image source: Getty Images.

The key highlights of the quarter:

  • Comparable-store sales rose 4.1%, which was was below Home Depot's (NYSE:HD) 7.5% spike in the period. Lowe's comps improved by 4% for the full year compared to the company's previous forecast of a 3.5% annual gain.
  • Overall sales dipped slightly, but only because fiscal 2016 had an extra week in the period.
  • Gross profit margin fell to 33.7% of sales from 34.4% a year ago.
  • Expenses rose to help send operating profit down to $1.1 billion, or 7% of sales, from $1.3 billion, or 8%, a year ago. Home Depot's comparable figure was significantly higher at 14.5%.
  • Lowe's spent $133 million on stock buybacks while paying out $341 million in dividends.

What management had to say

Management said the healthy comps gains resulted from solid execution in a few key areas. "We achieved comparable sales growth that exceeded our expectations," CEO Robert Niblock said in a press release, "driven by compelling consumer messaging, strong holiday event performance, and our integrated omni-channel customer experiences."

"We continue to build the capabilities required to deliver simple and seamless experiences and strengthen our position as the omni-channel project authority," Niblock continued.

Looking forward

Lowe's 2018 outlook implies increased competitive pressures that will require aggressive spending -- in areas like digital sales, wages, and price competition -- as the retailer defends against both traditional peers like Home Depot and e-commerce-focused rivals. Citing the "rapidly evolving competitive landscape," the company projected that operating profit margin will tick lower this year from the 9.6% rate Lowe's achieved in 2017. Home Depot, in contrast, is expecting its margin to hold steady at about 14.5% of sales.

Lowe's revenue growth forecast also trails the industry giant, as management believes comps will improve by 3.5% in 2018 to mark a slight deceleration from this past year's 4% increase. Home Depot is projecting 5% higher comps, which would indicate another year of significant market-share gains.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool has the following options: short May 2018 $175 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.