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Lowe's Issues Debt - Analyst Blog

By: Zacks.com
Posted: 9/5/2013 10:32:00 AM
Referenced Stocks: HD;LL;LOW;SHLD

Lowe's Companies Inc . ( LOW ) announced the issuance of $1.0 billion debt in two equal series of $500 million each, carrying coupon rates of 3.875% and 5.0% with maturity in 2023 and 2043, respectively.

Lowe's expects to generate net proceeds of $984 million from the debt issuance, which the company plans to utilize for general corporate purpose.

During the last reported quarter, Lowe's had long-term debt (excluding current maturities) of $9,015 million, and shareholders' equity of $13,062 million, reflecting a debt-to-capitalization ratio of 40.8%.

Being the world's second largest home improvement retailer, Lowe's remains well positioned to benefit from the housing market recovery. The company is closing underperforming stores and its strategy of enhancing customer-shopping experience and merchandising transformation is likely to help it generate incremental sales. Moreover, the company's sustained focus on price management and adding extra labor hours will help it boost its market share. 

Lowe's recently completed the acquisition of the majority assets of Orchard Supply Hardware Stores Corporation for $205 million in cash. Orchard's acquisition is a crucial move on Lowe's part as increasing square-footage in the key California market brings significant opportunities for the company to improve its top line and profitability.

Orchard's smaller-format stores located at prime locations of the region are likely to bolster the company's market positioning and will facilitate Lowe's to capitalize on the under-penetrated markets. 

Lowe's operates through 110 stores in California. However, its presence is significantly lower than its competitor, The Home Depot, Inc . ( HD ) and arguably one of the reasons why it has been lagging in terms of performance. Orchard, which was spun off by Sears Holdings Corporation ( SHLD ) in 2012, has 91 neighborhood hardware and garden stores of which Lowe's would acquire 72 stores.

Going forward, this Zacks Rank #2 (Buy) company stated that it will retain the Orchard brand and the current management team. Alongside, Orchard will operate as an individual unit.

Besides Lowe's, the other stock worth considering in the housing and allied sectors includes Lumber Liquidators Holdings, Inc . ( LL ), which holds a Zacks Rank #1 (Strong Buy).



HOME DEPOT (HD): Free Stock Analysis Report

LUMBER LIQUIDAT (LL): Free Stock Analysis Report

LOWES COS (LOW): Free Stock Analysis Report

SEARS HLDG CP (SHLD): Free Stock Analysis Report

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