Lowe's Cuts Full-Year Forecast as Profit Falls

Lowe's, the second-largest home improvement retailer, posted a lower quarterly profit on Monday and cut its full-year forecast as the deepening economic crisis led homeowners to put off big-ticket purchases.

The retailer also forecast profit for the current quarter below Wall Street estimates, saying rising unemployment, falling home prices and tight credit would continue to pressure its business.

Jon Fisher, a portfolio manager with Fifth Third Asset Management, said Lowe's poor outlook was no surprise as a pullback in consumer spending hurts all retailers.

"Retail's tough," Fisher said. "A portion of the merchandise Lowe's sells is big-ticket that has to be financed with credit. There's just no credit available and consumers aren't in a position to be borrowing money."

Lowe's earned $488 million, or 33 cents a share, in its fiscal third quarter, ended Oct. 31, down 24 percent from $643 million, or 43 cents a share, a year earlier.

Analysts had expected 28 cents a share, according to Reuters Estimates.

Ben Margot / AP

Sales rose 1.4 percent to $11.7 billion. Sales at stores open at least a year, an important retail measure, fell 5.9 percent.

Lowe's and industry leader Home Depot have posted weak results and cut their store growth as the U.S. housing slump and tight credit curtail demand for home improvement projects and big-ticket goods such as appliances.

The third quarter marked the fifth-consecutive quarterly profit fall for Lowe's, and Home Depot is expected to report its ninth-straight decline in quarterly profit Tuesday.

"People are going to have to start saving some money, and that means retailers are going to suffer," Fisher said. "There's a big disincentive to be spending money right now, holidays or no holidays."

Lowe's said sales weakness in the last week of October continued into November as economic conditions worsened.

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"We expect continued, broad-based external pressures on our industry, as rising unemployment, falling home prices, tight credit and volatile equity markets continue to erode consumer confidence and impact sales," Lowe's Chairman Robert Niblock said in a statement.

The Mooresville, North Carolina, retailer said it now expects profit of $1.46 to $1.54 a share for the full year, down from a forecast of $1.48 to $1.56 a share it stood by in September. A year earlier, Lowe's earned $1.86 a share.

Lowe's said it expects earnings of 8 cents to 16 cents a share for the current fourth quarter.

Analysts expected profit of 18 cents and $1.51 a share for the fourth quarter and full year, according to Reuters Estimates.

Lowe's shares were off in pre-market trading to $17.60 from their Friday close of $18.23 on the New York Stock Exchange.

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