Lowe's grows profit, but sales dip
CHARLOTTE, N.C. -- Lowe's, the nation's second largest home improvement chain, cited customer service and efficient operations Monday as reasons for a better-than-expected 9 percent rise in its second-quarter profit.
Still, decreasing sales at stores open at least a year, worsening trends in the housing market and uncertainty over credit quality led the Mooresville, N.C.-based retailer to trim its earnings outlook for the full year.
"We do face some near-term challenges, but we do see some opportunity in today's sales environment," said Larry Stone, Lowe's president and chief operating officer, on a call with analysts.
The home improvement market has been slowing amid a slump in the housing sector.
Last week, bigger rival Home Depot said its second-quarter income dropped 14.8 percent as sales at its stores open at least a year dropped 5.2 percent.
"Despite the external pressures impacting our results, our continued focus on serving customers and executing our initiatives produced comparable store sales within our guidance range," explained Robert A. Niblock, Lowe's chairman and chief executive.
Lowe's said it earned $1.02 billion, or 67 cents a share, for the three months ended Aug. 3, up from $935 million, or 60 cents a share, a year earlier.
Revenue rose to $14.17 billion from $13.39 billion a year earlier.
But same-store sales, or sales in stores open at least one year and a key measure of industry performance, fell 2.6 percent. The company had expected a same-store sales decline of 1 percent to 3 percent for the quarter.
Even so, the results came in ahead of Wall Street expectations. Analysts surveyed by Thomson Financial had been looking for net income of 61 cents a share on revenue of $14.13 billion.
For the year ending Feb. 1, Lowe's expects earnings of $1.97 a share to $2.01 a share. In May, Lowe's cut its 2007 earnings estimates to a range of $1.99 to $2.03 a share.
"It's minor, only 2 cents," Niblock said. "Not knowing what all the ramifications are going to be with the housing and credit markets, we wanted to be prudent."