Lowe's Warns Profit May Be Below Forecast
Retailer Lowe's warned on Monday that full-year profit could trail its prior forecast, saying dry conditions in some parts of the United States were hurting sales.
The company's shares fell as much as 5% in extended trading.
Lowe's, which is holding its analyst meeting on Tuesday, said "current sales are trending below" expectations as drought in the mid-Atlantic, Southeastern and Western parts of the United States hurt sales of outdoor products.
"The extent to which this will impact performance over the balance of fiscal 2007 is difficult to predict," the second-largest home improvement chain behind Home Depot said in a statement.
As a result, Lowe's said it now expects profit for the year ending in February to be at the low end or below a forecast of $1.97 to $2.01 a share it gave in August.
Analysts currently expect profit of $1.99 a share for the current year, flat with earnings of $1.99 the year before, according to Reuters Estimates.
Mooresville, North Carolina-based Lowe's, which is expanding to big cities such as New York and is set to open its first stores in Canada later this year, expects per-share profit to average 12% to 15% growth per year from 2008 through 2010, while total sales rise 8% to 11% a year during that time.
For the third quarter that ends Nov. 2, analysts currently expect profit of 45 cents a share on sales of $12.04 billion, according to Reuters Estimates.
Problems in the subprime mortgage sector that caters to borrowers with spotty credit have further slowed the U.S. housing market. Lower home sales and less construction have hurt results at Lowe's and Home Depot over the past year.
"Even as we face easier prior-year sales comparisons as we progress through the year, many uncertainties remain, and it seems prudent to further temper our sales and earnings outlook," Lowe's Chairman Robert Niblock said in the statement.
Atlanta-based Home Depot, which is refocusing on its core retail stores after selling off a unit that supplies materials to contractors, said earlier this month it expects per-share profit to decline 7% to 9% this year as the housing weakness continues into next year.
Lowe's shares sank 5% to $28.99 in after-hours trading from their $30.55 close on the New York Stock Exchange on Monday. Lowe's stock has fallen about 2% this year, while Home Depot is off about 16%.