(Reuters) - Lowe's Cos Inc reported strong growth in quarterly sales, showing that the No. 2 U.S. home improvement retailer was narrowing the gap with market leader Home Depot Inc.
Lowe's shares rose more than 6 percent in early trading, after the company reported that net sales increased 5.6 percent to $11.66 billion in the fourth quarter ended January 31.
Home Depot on Tuesday reported a 3 percent decline in sales in the same period, which was marked by winter storms and record cold in much of North America.
Lowe's big rival is more dependent on contractors, who had trouble working on projects in the stormy quarter.
"When extreme winter weather arrived late in the quarter, our distribution network responded quickly and efficiently to move product where it was most needed," Lowe's CEO Robert Niblock said in a statement on Wednesday.
Demand was strong for products such snow blowers, space heaters and fittings to fix broken pipes, the company said.
Home Depot's results had raised concerns that the U.S. housing recovery was losing momentum. But Niblock said Lowe's continued to see strength in "recovery markets" such as California, Arizona and Florida.
"With consumers more willing to invest in their homes, the job and income growth forecasted for 2014 should provide the wherewithal for continued home improvement spending," Niblock said on a call with analysts.
The U.S. Commerce Department said on Wednesday that sales of new single-family homes surged to a 5-1/2 year high in January.
Lowe's, which struggled to catch up with Home Depot after the recession, has tried to arrest market-share losses by offering discounts and products aimed at specific regions.
The company posted a 3.9 percent rise in comparable store sales in the fourth quarter. It also said its board had authorized an additional $5 billion share repurchase program
Lowe's gross margin expanded to 34.67 percent in the quarter ended January 31 from 34.27 a year earlier.
"We believe that Lowe's has made significant operational strides, and is now positioned to benefit from its investments in its store resets and product line reviews," Credit Suisse analyst Gary Balter wrote in a note to clients.
Lowe's reported a 6.3 percent rise in fourth-quarter net income to $306 million, or 29 cents per share, up from $288 million, or 26 cents per share, a year earlier.
"For businesses that are this mature, to find growth like this is fairly difficult," Morningstar analyst Jaime Katz said.
Analysts on average were expecting a profit of 31 cents per share, according to Thomson Reuters I/B/E/S.
Home Depot's net profit fell about 1 percent in the quarter.
Lowe's said it expected 2014 total sales to rise by about 5 percent. That translates to about $56.07 billion.
The company also forecast earnings of about $2.60 per share for the year ending January 30, 2015. Analysts on average were expecting $2.64 per share on sales of $56.25 billion.
Lowe's shares were up 5.2 percent at $50.64 in late-morning trading on the New York Stock Exchange. They had risen about 34 percent in the year up to Tuesday's close.
Home Depot's shares, which were up 1.9 percent at $82.50, rose about 27 percent in the same period.
Lowe's shares were trading at 18.03 times forward earnings as of Tuesday's close, while Home Depot shares were trading at 17.54 times.
Reporting by Maria Ajit Thomas in Bangalore; Editing by Joyjeet Das and Ted Kerr