Time to Get Greedy with Lowe's Companies, Inc. Stock

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I don't enjoy shopping in Lowe's (NYSE: LOW). I'm not a handy person, and I generally have no idea where anything is, nor do I have the ability to explain to the hard-to-find store staff what I might be looking for.

Despite my personal distaste, the home improvement chain has shown that it can succeed in a market where many retailers have struggled. The company has shown strong results, and while it has embraced omnichannel operations, it has also shown that its product line remains perfect for stores.

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Lowe's may not be a pleasant place to shop everyone (at least for people who aren't knowledgeable about home improvement) but it's a very strong business. This isn't a chain I plan to buy shares in, but it's one that should continue to grow its share price for a long time.

What is Lowe's doing?

While the internet has disrupted a lot of retailers, Lowe's merchandise has mostly helped it avoid that fate. It's not practical to buy a toilet or a bathtub online (though you can through Lowe's website). In addition, items like drywall, lumber, and paint, are bulky, making in-store pickup logical.

Lowe's does have a strong omnichannel presence. You can order online to pick up in store and have many things delivered. Stores, however, remain the focus for the brand, and that's not likely to change -- consumers want to see the items that will go into their homes in person before buying them.

Is it working?

Lowe's has been putting up very strong numbers. In its most recent quarter, it reported net earnings of $872 million and diluted earnings per share (EPS) of $1.05. That's up from net earnings of $379 million and diluted EPS of $0.43 in the third quarter of 2016.

In addition, sales rose 6.5% in Q3, and comparable-store sales grew by 5.7% in the quarter. Through nine months of fiscal 2017 sales are up 7.9% and comparable-stores sales have risen by 4%.

"During the third quarter, we drove traffic in-store and online with compelling messaging and integrated customer experiences. We continue to invest in omnichannel capabilities to enhance value for customers and shareholders," said CEO Robert A. Niblock in the chain's Q3 earnings release. "I am also pleased with the progress we've made to enhance our product and service offering for the Pro customer, delivering another quarter of comparable sales above the company average.

What happens next?

While at some point digital technology may be good enough for people to get a true picture of home improvement products online, that day is a long way away. Even when it happens, it seems likely that consumers will want to see things like flooring, paint, light fixtures, and other items in person before buying them.

Lowe's has embraced digital, but it has done so in a way that keeps its stores front and center. This is a business driven by products that don't lend themselves to easy shipping which consumers will still want to see in person. That's a recipe for long-term stock growth, and the home improvement store should deliver that (even if the thought of having to go there makes me sweat).

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool recommends Lowe's. The Motley Fool has a disclosure policy.

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