Lowe’s plans further expansion, despite expected low earnings

CHARLOTTE, N.C. —Home Depot isn’t the only home improvement retailer feeling the pinch. Lowe’s said its earnings are likely to fall below its forecast for fiscal 2008, acknowledging the housing slump is dragging on longer than expected.

Lowe’s announced last month that it expects earnings to fall at the low end or below its forecast of $1.97 to $2.01 for fiscal 2008. In a statement, cfo Robert Hull Jr. added that “current pressures will likely continue into 2008,” but predicted faster growth for 2009 and 2010. The announcement came as no surprise coming on the heels of a second quarter in which Lowe’s reported a 2.6% decline in same-store sales and it is predicting sales for the total year to be down 2% to 3%. During a presentation to analysts on Sept. 25, Lowe’s ceo Robert Niblock explained that, “many uncertainties remain and it seems prudent to temper our sales and earnings outlook.”

But Lowe’s is hardly hurting despite its drop in sales. For the first six months of its current fiscal year, it posted earnings of $1.76 billion and earnings of $1.02 billion for its second quarter ended Aug. 3. And Lowe’s still expects to open 135 to 145 stores in fiscal 2008, with the majority of those stores in its larger format.

The chain is also moving forward with plans to open its first store in Canada later this year in Hamilton, Ontario, just outside of Toronto. Lowe’s expects the Toronto market to support up to 10 stores and could eventually open up to 100 stores in Canada, which is already home to 155 Home Depot stores. It’s looking toward 2009 to expand into Mexico and has targeted the city of Monterey for its first opening south of the border.