Lowe's 1Q profit up, but cuts 2012 profit outlook
MOORESVILLE, N.C. (AP) — Lowe's Cos.' first-quarter profit climbed 14 percent as warmer weather helped boost sales earlier in the quarter. But the world's second-biggest home-improvement company lowered its full-year earnings forecast on Monday, saying it's still cautious because of the weak housing market and other economic conditions.
Lowe's shares fell $2.88 per share, or a little more than 10 percent, to close at $25.60 Monday.
Lowe's results mirror the uneasiness shoppers feel in the uncertain economy. While Americans are spending, they continue to so gingerly.
"While there has been some acceleration in consumer sending recently, it was aided by unseasonably warm weather," said Robert Niblock, chairman, CEO and president of Lowe's in an address to investors during a conference call. "While there has been improvement in housing turnover, the increase was off a small base. We believe future uncertainties are still weighing heavily on the consumer."
The Mooresville, N.C. retailer reported net income of $527 million, or 43 cents per share, for the period ended May 4. That's up from $461 million, or 34 cents per share, a year ago. Revenue rose 8 percent to $13.15 billion from $12.19 billion.
The performance beat the expectations of analysts polled by FactSet who forecast earnings of 42 cents per share on revenue of $12.99 billion.
Revenue at Lowe's stores open at least a year increased 2.6 percent, including 2.7 percent in the U.S. This is a gauge of a retailer's health because it excludes results from stores recently opened or closed.
Lowe's said it expects 2012 earnings of $1.73 to $1.83 per share, down from $1.75 to $1.85 per share. It maintained its guidance for revenue to rise 1 percent to 2 percent, which implies $50.69 billion to $51.2 billion. Analysts expected full-year earnings of $1.87 per share on revenue of $50.94 billion.
Lowe's results follow a strong showing from Home Depot last week. The largest home-improvement chain reported that its first-quarter net income climbed almost 28 percent, while revenue rose 6 percent. The company raised its 2012 net income guidance on the better-than-expected profit.
Facing a still weak housing market and stiff competition from Home Depot, Lowe's is working on strengthening customer service, reviewing of all its products and focusing more on its e-commerce business.
The company last summer also returned to its "everyday low prices strategy." Company executives said the strategy will take time. Customers had gotten used to sales since the retailer had stepped up temporary promotions when the housing market began weakening in 2006.
Lowe's is hoping that reducing temporary sales events will increase profits in the long run. Temporary promotions have created pronounced peaks and valleys in the business as shoppers show up for deals and then retreat once they disappear. Lowe's has said it will be able to operate more efficiently if it runs a consistent business.
In a phone interview, Niblock declined to say how much Lowe's has permanently cut prices, but the cuts have happened across a wide product mix. During the latest quarter, Lowe's offered 30 percent fewer discounts than a year ago.
"It's hard to wean shoppers (off discounts), but we do think we're making some progress," said Niblock during an interview with The Associated Press Monday. "This is a fluid process. We're monitoring what worked, and what didn't.'"