Lowe's said Monday its second-quarter profit fell nearly 8 percent, but managed to top Wall Street expectations as the home improvement chain benefited from green thumbs repairing last year's drought-stricken gardens, tight expense controls and better-than-expected sales.
Still, the nation's second-largest home improvement retailer said it expects to continue to suffer from a weak housing market that shows no immediate signs of recovery and offered a weaker-than-expected outlook for the third quarter. It nonetheless raised its guidance for the full year.
The Mooresville, N.C.-based Lowe's earned $938 million, or 64 cents per share, in the three months ended Aug. 1. That's down from $1.02 billion, or 67 cents per share, during the same period last year.
Executives said sales increased 2.4 percent to $14.5 billion from $14.17 billion a year ago.
Analysts surveyed by Thomson Reuters expected a smaller profit of 56 cents per share on lower revenue of $14.1 billion.
"It was a tough environment out there," said Chairman and Chief Executive Robert Niblock. "I'm real proud of the team and the results we delivered in light of the environment."
The home improvement store said "relative" strength in seasonal lawn and garden and nursery sales gave the company a welcome second-quarter boost as homeowners restored their lawns and undertook other small outdoor projects to repair damage brought by last year's drought.
Niblock said the company benefited from the economic impact of the fiscal stimulus checks.
Still, Lowe's _ along with other competitors in the sector -- said sales of bigger ticket items continues to fall, particularly in regional markets hurt most by the housing downturn. (Watch the video for more information on the company's earnings...)
Among the hardest hit areas -- such as Florida and California -- same store sales fell by double digits during the quarter.
Overall, the company's comparable store sales -- an important retail industry measure of sales in sites open at least a year -- fell 5 percent.
"All things considered the quality of the second earnings was good," Capital Markets analyst Wayne Hood told investors in a research note on Monday.
Amid such economic uncertainty, Lowe's said that it expects earnings per share to be in the range of 27 cents to 31 cents in the fiscal third quarter which ends Oct. 31. Thomson Reuters says analysts were expecting 33 cents a share.
The company expects total sales to increase a modest 1 to 2 percent for the quarter while same-store sales, or sales at stores open at least a year, should fall 5 to 7 percent. Same-store sales are considered a key indicator of a retailer's health.
For the fiscal year, the company, however, raised its earnings per share guidance to a range of $1.48 to $1.56 per share. Thomson Reuters says analysts were looking for $1.50 a share for the year.
In May, Lowe's said it expected 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.
The company is still sticking with its total sales growth projection of 1 percent for the year. The company predicted that same-store sales should fall 6 to 7 percent for the year.
"While Q3 will not be as strong and Q2 was helped by seasonal and stimulus checks, this is first time in recent memory that the company did not lower guidance and actually raised it, which is major psychological change and keeps us bullish on (the company) and our other quality names," wrote Gary Balter, an analyst at Credit Suisse, in a report issued Monday.
(Watch the video above for more information on what analysts are saying about Lowe's and Home Depot.)
Lowe's is second to Home Depot among the U.S. home improvement retailers. Home Depot reports its earnings on Tuesday.
Lowe's shares rose 26 cents, or 1.1 percent, to $24.76 in morning trading after rising as high as $25.47 earlier in the session.