Despite rising interest rates, Lowe is optimistic on home improvement demand

Despite rising interest rates, Lowe is optimistic on home improvement demand ...

In the face of rising mortgage rates, Lowe's Cos Inc increased its full-year sales and profit predictions on Wednesday.

As the epidemic wreak havoc on Lowe's and his competitors, the housing market has risen to new highs, but analysts warned that higher mortgage rates and prices would make customers avoid investing in their house.

On Wednesday, Lowe's sounded optimistic about its future.

"We are confident that home improvement demand will remain strong despite an increase in interest rates," said Chief Financial Officer David Denton on an earnings call.

Executives predicted that increased demand for millennials to buy suburban houses and the addition of remote work policies would encourage a rise in house upgrade jobs.

According to the Mortgage Bankers Association, the 30-year fixed mortgage rate increased more than 4% this month.

FILE PHOTO - An employee resells items at a Lowe's home improvement store in Austin, Texas, United States, February 27, 2017. Picture taken by Mike Khursheed February 27, 2017. REUTERS/Mohammad Khursheed

Lowe's stock surged 5.1 percent in early trading. They fell nearly 4% on Tuesday following a profit margin warning from Home Depot.

Lowe's, in contrast, said it expects gross profit margins to increase slightly from 2021, compared to a previous forecast of them being roughly flat.

Lowe's gross margins rose by 115 basis points to 32.9% in the fourth quarter, while Home Depot's margins decreased by 35 basis points to 33.2%.

Lowe's is closing the gap with Home Depot, as its strategy of raising prices and offering lower discounts pays off, according to D.A. Davidson & Co analyst.

Lowe's expects total sales of $97 billion to $99 billion for its fiscal 2022 budget, compared to a previous estimate of $94 billion to $97 billion.

From the $12.25 to $13 it previously thought, the company increased earnings per share estimates for the whole year.

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