Cost cuts, higher sales boost Lowe's 4Q results

NEW YORK -- Consumers responded to Lowe's rebates for higher-priced items such as cabinets and countertops, a sign home owners are starting to consider bigger remodeling projects as the economy stabilizes.

Modestly higher sales and cost cutting helped Lowe's fourth-quarter profit rise 27 percent, the first quarterly increase since 2007, the company reported Monday.

"Our results in both flooring and cabinets and countertops are another sign that consumers are beginning to show willingness to tackle big-ticket discretionary projects," Chief Operating Officer Larry Stone said.

The No. 2 home-improvement chain also said Monday that it expects sales to rise this year as the long-suffering housing market and broader economy recover. Still, a snowy February kept Lowe's cautious about the first-quarter outlook.

"During the quarter, we saw sequential improvement in bigger ticket projects," said CEO Robert A. Niblock in a call with investors. "We view this as an encouraging sign regarding consumer's willingness to take on larger, more discretionary products.

There is still a "psychological impact" of consumers' worries about falling home prices and unemployment, he said, but overall, "the economic outlook is much better than a year ago."

Quarterly profit rose 27 percent to $205 million, or 14 cents per share, from $162 million, or 11 cents per share last year, ahead of the 12 cents per share analysts polled by Thomson Reuters, on average, expected.

It was the first year-over-year increase in earnings since the second quarter of 2007.

Revenue edged up nearly 2 percent to $10.17 billion, from $9.98 billion last year, while analysts expected revenue of $10 billion.

Shares fell 3 cents to $23.10 during midday trading.

Popular sellers included appliances, seasonal products, paint, flooring and cabinets and countertops.

Niblock said the federal cash-for-appliances rebate program, which offers mail-in rebates on energy-efficient appliances, did not notably affect fourth-quarter results. But he said as the programs expand state-by-state, they should help results beginning in the first quarter. Many aren't scheduled to start until March or April.

Lowe's also authorized a $5 billion share buyback program. It has no expiration date but the company said it expects to use the full amount over the next three years.

Deutsche Bank analyst Mike Baker said Niblock's comments that the worst is behind are supported by better trends in higher-priced items, improving special-project sales and by the fact that Lowe's will buy back stock for the first time since 2007. The buyback plan is another good sign, he said.

For the year, profit fell 19 percent to $1.78 billion, or $1.21 per share. Revenue fell 2 percent to $47.22 billion.

For the fiscal year ending next January, the company expects earnings of $1.30 to $1.42 per share on a 4 percent to 6 percent revenue increase, implying revenue of $49.11 billion to $50.05 billion.

Analysts expect a profit of $1.37 per share on revenue of $48.61 billion.

Lowe's forecast first-quarter earnings of 27 to 29 cents per share, short of analyst expectations of 33 cents per share. It expects sales to rise 1 percent to 3 percent in the first quarter, implying sales of $11.94 billion to $12.18 billion, while analysts expect revenue of $11.97 billion.

Lowe's larger competitor Home Depot reports earnings Tuesday.