Lowe’s woes continue as housing hurts

Second-quarter profits fell 19.1% at Lowe’s, as the company’s sales fell short of expectations and store expansion was curtailed, resulting in a $48 million charge.

Lowe’s second-quarter net income totaled $759 million, compared with $938 million the prior year, while earnings per share declined 19% to 51 cents from 63 cents. The earnings per share figure was at the low end of the company’s guidance of 51 cents to 55 cents and below analysts’ consensus estimate of 54 cents.

Sales for the quarter declined 4.6% to $13.8 billion from $14.5 billion while same-store sales declined 9.5%. Second-quarter sales benefited from the opening of 18 new stores which gave the company a total of 1,688 units at the end of the quarter.

“Wavering consumer confidence, unseasonable weather in core markets, and restrained customer spending compared to last year's fiscal stimulus-aided results led to lower than expected sales in the second quarter,” said Robert Niblock, Lowe's chairman and CEO. “Cautious consumers remain reluctant to take on discretionary projects until signs of economic improvement are more evident.”

He added that even though the company’s sales were weak, sound execution, inventory management and expense control produced reasonable profits and market share gains.

“There are some indications that a bottoming process in housing and the broader economy is under way, and we have seen customer traffic levels stabilize as we benefit from the resurgence of a do-it-yourself home improvement mindset,” Niblock said. “As near-term pressures on the consumer remain, we enter the back half of the year with a cautious sales outlook but have the flexibility to react to a quickly changing environment.”

The company isn’t forecasting a quick rebound in demand however as it said third-quarter same-store sales are expected to decline between 6% and 10%. The company will continue to open store this year, adding a total of 62 to 66 units, but next year new store openings will be reduced to a range of 35 to 45 units.