Lowe’s Beats Forecasts With 54% Profit Jump
Lowe’s Cos. said its fiscal first-quarter earnings jumped 54% and profit this quarter will exceed forecasts, as the world’s second-largest home-improvement retailer reduces expenses and opens stores.
Net income in the period ended May 3 increased to $345.8million, or 44 cents a share, from $225.3million, or 29 cents, a year ago, Lowe’s said. Sales rose 23% to $6.47billion.
Lowe’s said it controlled inventory and sold more appliances and flooring, widening profit margins. Demand for lawn and garden products also bolstered sales as the retailer opened 42 stores.
Chief Executive Robert Tillman is challenging bigger rival Home Depot Inc. by expanding in cities such as Boston, where the larger populations have higher average incomes, investors said.
“Lowe’s is in a sweet spot because they continue to put stores in more lucrative markets,” said Tim Hathaway of Brown Investment Advisory & Trust Inc., which manages about $5billion in assets including 417,729 Lowe’s shares. “People are spending more money to improve their homes.”
Shares of Lowe’s rose $2.04 to $46.80. The stock has climbed 37% in the last year. Home Depot rose 41cents to $48.50. Both trade on the New York Stock Exchange.
Analysts had expected first-quarter profit of 36cents, according to the average estimate of those surveyed by Thomson Financial/ First Call. Lowe’s forecast profit of 53cents to 54cents for the second quarter, and $1.66 to $1.69 for the year. Analysts’ estimates were 51cents and $1.58.
The results “add to our conviction that we have a successful model,” Tillman said. “We are putting the right stores in the right markets.”
Some investors said Lowe’s may have a hard time increasing sales in the second half, even with home sales forecast to rise, if the Federal Reserve raises interest rates.
Tillman said although he is cautious about the outlook for the economy for the rest of the year, “this hasn’t stopped our expansion plans.” The Wilkesboro, N.C.-based company plans to open 123 stores this year, including 23 this quarter. More than half of Lowe’s 785 stores are in metro markets with populations that exceed 500,000.
La Habra and Antioch in California are among the communities that will get new stores.
Sales at stores open at least a year in the first quarter rose 7.5%. Lowe’s said sales gained in most product categories.
