Lowe’s Profit Rises on Strong Sales

Lowe’s Cos. said Monday that fiscal first-quarter earnings rose 8.1%, helped by new stores in metropolitan areas and warm weather, which prompted early sales of riding mowers and barbecue grills.

But the company said sales increases probably would slow in the second half as concern grows about rising interest rates.

Net income climbed to $455 million, or 57 cents a share, from $421 million, or 53 cents, a year earlier. Sales in the quarter ended April 30 rose 22% to $8.68 billion, the company said.

Sales gains at existing stores probably will slow to 3% to 5% in the second half, from 9.9% last quarter, company President Robert Niblock said.

Shares of Lowe’s, which operates more than 975 stores in 45 states, fell 90 cents to $49.68 on the New York Stock Exchange. They had fallen 8.7% this year amid investor concern over rising mortgage rates.

A slowdown in the housing market may hurt sales of appliances and building materials, say investors and analysts. Higher mortgage rates also would slow refinancing of homes, a source of spending on home renovation.

Piper Jaffray analyst Michael Cox downgraded his rating on Lowe’s to “market perform” Monday, citing the expected rise in rates in the second half.

Last year’s second half was boosted by income tax rebates, inflation in building materials and warm, sunny weather late into the third quarter -- factors that may not recur this year, Niblock said.

First-quarter profit was 3 cents more than the 54-cent average forecast of 24 analysts surveyed by Thomson First Call.

Chief Executive Robert Tillman opened 29 stores last quarter as the No. 2 home improvement retailer expands into markets dominated by Home Depot Inc. The company plans to add 290 stores over the next two years.

Lowe’s expects to earn as much as $2.72 a share this year, including 91 cents in the second quarter.

Lowe’s strategy includes catering to women by designing stores with wide aisles and bright lighting, and offering brands such as Eddie Bauer and Nickelodeon paint and Levolor faux wood blinds.

The company in February began to sell kitchen faucets designed by Michael Graves and in March expanded its appliance line by adding Whirlpool Corp. water coolers.