All-Time LOW? Company Suggests Frosty the Snowman Responsible for SG&A De-Leverage
Last week, Lowe’s (LOW – $23.98) management provided Q1 2010 earnings guidance that included estimated SG&A de-leverage of “approximately 90 Bps.”
While the largest driver is expected to be store payroll (30 Bps to 40 Bps de-leverage), management also suggested that the company will incur “extraordinary snow removal and building repair expenses” that the company expects will negatively impact Q1 SG&A by 15 Bps.
They’re blaming the SNOW? You’ve gotta be kidding us.
Here’s what is interesting. Unlike Home Depot (HD – $31.43), who has been doing a great job cutting expenses over the past 12 – 18 months, LOW continues to report runaway SG&A costs that seemingly show no signs of abating.
HD’s annual SG&A guidance suggests that expenses will “grow at approximately 60% of our sales growth rate.” Sounds like leverage to us.
See trailing 4-quarter SG&A% charts below. Despite soft sales, HD’s SG&A costs have flattened as a percent of sales.
Conversely, LOW’s SG&A% continues to move higher (again, 90 Bps of de-leverage is expected in Q1 2010). LOW management is now beginning to blame SNOW. What’s next… March winds, April showers, and May flowers?
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on Monday, March 1st, 2010 at 2:37 pm and is filed under Commentary.
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All-Time LOW? Company Suggests Frosty the Snowman Responsible for SG&A De-Leverage
Last week, Lowe’s (LOW – $23.98) management provided Q1 2010 earnings guidance that included estimated SG&A de-leverage of “approximately 90 Bps.”
While the largest driver is expected to be store payroll (30 Bps to 40 Bps de-leverage), management also suggested that the company will incur “extraordinary snow removal and building repair expenses” that the company expects will negatively impact Q1 SG&A by 15 Bps.
They’re blaming the SNOW? You’ve gotta be kidding us.
Here’s what is interesting. Unlike Home Depot (HD – $31.43), who has been doing a great job cutting expenses over the past 12 – 18 months, LOW continues to report runaway SG&A costs that seemingly show no signs of abating.
HD’s annual SG&A guidance suggests that expenses will “grow at approximately 60% of our sales growth rate.” Sounds like leverage to us.
See trailing 4-quarter SG&A% charts below. Despite soft sales, HD’s SG&A costs have flattened as a percent of sales.
Conversely, LOW’s SG&A% continues to move higher (again, 90 Bps of de-leverage is expected in Q1 2010). LOW management is now beginning to blame SNOW. What’s next… March winds, April showers, and May flowers?
This entry was posted on Monday, March 1st, 2010 at 2:37 pm and is filed under Commentary. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.