Ackman takes stake in Lowe’s, stock price surges

(Reuters) – Billionaire investor William Ackman said on Wednesday that his hedge fund had taken a roughly $1 billion stake in Lowe’s (LOW.N), boosting the U.S. home improvement retailer’s stock by 10.4 percent.

Ackman revealed the investment, the second big bet his Pershing Square Capital Management hedge fund has made this year, at a New York conference, said two attendees at the private event on condition of anonymity.

The news came hours after Lowe’s affirmed its annual financial targets but reported slightly weaker-than-expected first-quarter results.

One day earlier Lowe’s announced top management changes, naming J.C. Penney (JCP.N) Chief Executive Marvin Ellison to replace CEO Robert Niblock, who will retire in July.

As one of the hedge fund industry’s most closely watched activist investors, Ackman’s stock bets tend to push up shares of companies he invests in, on speculation that he will agitate for boardroom changes. Lowe’s shares rose $8.94 to close at $94.69, a three-month high, on the New York Stock Exchange.

Ackman’s record has been spotty in recent years. Only a week ago he said his funds were finally making money again after chalking up losses earlier in 2018 on the heels of three years of negative returns, spoiled mainly by a bad bet on Valeant Pharmaceuticals International Inc (VRX.TO).

In January Ackman announced an investment in Nike Inc (NKE.N) which he exited months later with a $100 million profit. More recently his longstanding investments in Chipotle Mexican Grill Inc (CMG.N) and Automatic Data Processing (ADP.O) have contributed to gains.

With Lowe’s, Ackman supports Ellison and is not seeking a board seat for Pershing, said a person familiar with the investor’s thinking who was not authorized to discuss it publicly.

FILE PHOTO: A Lowe’s hardware story is show in Carlsbad, California, United States May 23, 2016.REUTERS/Mike Blake/File Photo

At the start of 2018 Ackman told clients that he would focus more on the investment business instead of marketing his roughly $8 billion hedge fund. Wall Street took that as a signal that one of the industry’s highest-profile investors was planning to stay out of the limelight. But as Pershing’s returns improved, Ackman has been seen more at conferences and other events.

Hedge fund D.E. Shaw Group, which has a roughly $1 billion stake in Lowe’s, also has been pushing for changes behind the scenes since January.

Ackman quit J.C. Penney’s board five years ago after having tried in vain for years to overhaul the retailer by hiring Ron Johnson as CEO and upgrading the merchandise. He has been following Ellison’s career and had invested in Lowe’s before.

Ellison, who became J.C. Penney’s CEO in 2015, was a senior executive at Lowe’s chief rival Home Depot (HD.N) a decade ago.

In its quarterly results, Lowe’s brushed aside lower-than-expected same-store sales as driven chiefly by cold weather.

A prolonged winter in some U.S. states hit demand for outdoor products at Lowe’s in the February-April period, but the company was optimistic about making up for lost business.

“We are anticipating recovering the majority of the sales miss in the first quarter. … So that’s what we factored in to maintain our guidance,” Chief Financial Officer Marshall Croom said on a conference call with analysts.

Reporting by Svea Herbst-Bayliss in Boston Aishwarya Venugopal in Bengaluru; Editing by Sai Sachin Ravikumar and Richard Chang

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