Lowe's Posts Lower Profit, Cuts Year Forecast
Retailer Lowe's reported an 18 percent drop in first-quarter profit Monday as the slumping US housing market and soft economy hurt sales, and it cut its full-year profit forecast, sending its shares down as much as 3 percent.
The second-largest home improvement chain behind Home Depot also pared its sales-growth forecast for this year and said earnings for the current quarter would trail the year-earlier level.
"You're looking at a difficult economy," said Douglas Christopher, an analyst with Crowell Weedon & Co. "Lowe's is being hit by the discretionary cycle."
Earnings came to $607 million, or 41 cents a diluted share, for the quarter ended May 2, compared with $739 million, or 48 cents a share, a year earlier.
Analysts had expected 40 cents a share, according to Reuters Estimates.
The home improvement sector has been hurt as consumers curb big-ticket renovations in the face of falling home values, tighter credit requirements and higher prices for basic items such as food and gasoline.
Atlanta-based Home Depot is expected to post lower first-quarter profit Tuesday, pressured by declining sales and costs tied to store closures and a plan to scale back future openings.
"Consumers are facing rising costs elsewhere that may dampen their spending on home improvement," Lowe's Chairman Robert Niblock told a conference call.
Profit at Lowe's has fallen for the past three quarters, while Home Depot's quarterly earnings have declined for more than a year.
First-quarter sales at Lowe's fell 1.3 percent to $12 billion -- lower than the $12.3 billion expected by analysts.
Sales at stores open at least a year, or same-store sales, fell 8.4 percent.
Wet, cooler weather hurt results, and no product categories had same-store sales increases in the quarter, Lowe's said.
The average purchase fell about 3 percent. Gross margin contracted to 34.69 percent of sales from 34.99 percent a year earlier, as higher fuel prices raised the cost of goods sold.
Lowe's, based in Mooresville, N.C., said it gained market share in the first quarter and expects to benefit as weaker building-products suppliers struggle in the current economic slowdown.
It now expects full-year profit per share of $1.45 to $1.55, down from its forecast of $1.50 to $1.58 a share in February. Total annual sales are now expected to rise about 1 percent, down from a previous forecast of a rise of about 3 percent.
The retailer forecast profit of 54 to 59 cents a share for the second quarter, down from 67 cents a share a year earlier, on a total sales increase of about 1 percent, with same-store sales falling 6 to 8 percent.
Analysts currently expect profit of $1.54 a share for the year and 56 cents a share for the second quarter, according to Reuters Estimates.
Shares of both Lowe's and Home Depot have fallen about 25 percent in the past year.